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Title: Should Robots Be Taxed?

Author(s): Joao Guerreiro, Sérgio Rebelo and Pedro Teles

Publication Date: August 2017

Keyword(s): automation, inequality, optimal taxation and robots

Programme Area(s): Macroeconomics and Growth and Public Economics

Abstract: We use a model of automation to show that with the current U.S. tax system, a fall in automation costs could lead to a massive rise in income inequality. This inequality can be reduced by raising marginal income tax rates and taxing robots. But this solution involves a substantial efficiency loss for the reduced level of inequality. A Mirrleesian optimal income tax can reduce inequality at a smaller efficiency cost, but is difficult to implement. An alternative approach is to amend the current tax system to include a lump-sum rebate. In our model, with the rebate in place, it is optimal to tax robots only when there is partial automation.

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Bibliographic Reference

Guerreiro, J, Rebelo, S and Teles, P. 2017. 'Should Robots Be Taxed?'. London, Centre for Economic Policy Research. https://cepr.org/active/publications/discussion_papers/dp.php?dpno=12238