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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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    2. Pablo Casas & José L. Torres, 2024. "Government size and automation," International Tax and Public Finance, Springer;International Institute of Public Finance, vol. 31(3), pages 780-807, June.
    3. Yunmin Chen, 2024. "Optimal dynamic nonlinear income taxation with wage regulations," International Tax and Public Finance, Springer;International Institute of Public Finance, vol. 31(4), pages 1009-1036, August.
    4. Vesely, Stepan & Amaris, Gloria, 2025. "AI-driven income inequality and preferences for redistribution," Economic Analysis and Policy, Elsevier, vol. 87(C), pages 642-648.
    5. Abeliansky, Ana Lucia & Prettner, Klaus & Rodriguez-Crespo, Ernesto, 2024. "Climate change and automation: the emission effects of robot adoption," Department of Economics Working Paper Series 370, WU Vienna University of Economics and Business.
    6. Bloom, David E. & Prettner, Klaus & Saadaoui, Jamel & Veruete, Mario, 2025. "Artificial intelligence and the skill premium," Finance Research Letters, Elsevier, vol. 81(C).
    7. Li, Jianjun & Wu, Zhouyi & Yu, Kaijia & Zhao, Wei, 2024. "The effect of industrial robot adoption on firm value: Evidence from China," Finance Research Letters, Elsevier, vol. 60(C).
    8. Aronsson, Thomas & Bastani, Spencer & Tayibov, Khayyam, 2025. "Redistribution and labor market inclusion," Working Paper Series 2025:19, IFAU - Institute for Evaluation of Labour Market and Education Policy.
    9. Maeda, Daiki & Morimoto, Takaaki & Motoyama, Takumi & Saito, Yuki, 2025. "Effects of a capital-use tax and automation subsidy in a model of innovation and automation," Journal of Economic Behavior & Organization, Elsevier, vol. 238(C).
    10. Kim, Taehoon & Jung, Hoyong, 2026. "Industrial robotisation and local taxes: Evidence from South Korea," Technology in Society, Elsevier, vol. 84(C).
    11. Zhang, Jingting & Shi, Zhiru, 2025. "Suppress or let go? The time-varying roles of automation towards labor market," Structural Change and Economic Dynamics, Elsevier, vol. 74(C), pages 158-174.
    12. Nakatani, Ryota, 2024. "Optimal Taxation in the Automated Era," MPRA Paper 121347, University Library of Munich, Germany.
    13. Nakatani, Ryota, 2022. "Optimal fiscal policy in the automated economy," MPRA Paper 115003, University Library of Munich, Germany.
    14. Furgasė Jevgenija & Miceikienė Astrida, 2024. "Reforming Labour Taxation: Addressing the Employment Effects of Technological Progress," Management Theory and Studies for Rural Business and Infrastructure Development, Sciendo, vol. 46(4), pages 592-608.

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