Discussion paper

DP12238 Should Robots Be Taxed?

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.


Rebelo, S, P Teles and J Guerreiro (2017), ‘DP12238 Should Robots Be Taxed?‘, CEPR Discussion Paper No. 12238. CEPR Press, Paris & London. https://cepr.org/publications/dp12238