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Optimal Taxation of Robots

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  • Uwe Thuemmel

Abstract

I study the optimal taxation of robots, other capital, and labor income. I show that it is optimal to distort robot adoption. The robot tax (or subsidy) exploits general-equilibrium effects to compress wages, which reduces income-tax distortions of labor supply, thereby raising welfare. In the calibrated model, when robots are expensive, a robot subsidy is optimal. As robots get cheaper, it becomes optimal to tax them. Yet, when reforming the status-quo tax system, most welfare gains can be achieved by adjusting the income tax. The additional gains from taxing robots differently from other equipment capital are close to zero.

Suggested Citation

  • Uwe Thuemmel, 2023. "Optimal Taxation of Robots," Journal of the European Economic Association, European Economic Association, vol. 21(3), pages 1154-1190.
    • Handle: RePEc:oup:jeurec:v:21:y:2023:i:3:p:1154-1190.
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    File URL: http://hdl.handle.net/10.1093/jeea/jvac062
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    References listed on IDEAS

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    Cited by:

    1. David E. Bloom & Klaus Prettner & Jamel Saadaoui & Mario Veruete, 2023. "Artificial intelligence and the skill premium," Department of Economics Working Papers wuwp353, Vienna University of Economics and Business, Department of Economics.

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