Should Robots be Taxed?, Review of Economic Studies
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 making the current income-tax system more progressive and by taxing robots. But this solution involves a substantial efficiency loss. A Mirrleesian optimal income tax can reduce inequality at a smaller efficiency cost. An alternative approach is to amend the current tax system to include a lump-sum rebate. With the rebate in place, it is optimal to tax robots as long as there is partial automation.
Sergio Rebelo, Joao Guerreiro, Pedro Teles
Rebelo, Sergio, Joao Guerreiro, and Pedro Teles. 2022. Should Robots be Taxed?. Review of Economic Studies. 89(1): 279-311.