Manufacturing

How Would a Robotics Tax Affect Manufacturing Businesses?

Jim Honz, Tax Consultant + Former Shareholder

October 4, 2018

How Would a Robotics Tax Affect Manufacturing Businesses?

These days, manufacturing businesses of all sizes and scopes utilize robots in a variety of ways. Doing so helps these companies save time and money and ultimately improve their bottom lines. However, are there underlying issues with the robotics “revolution” that could lead to potential future taxes? Robotics are truly transforming manufacturing. Yet with this “revolution” comes two questions:

To what extent should a given manufacturing workforce be automated, and
Could the job losses associated with increased use of robotics spur governments to implement “robot taxes”?

Around 85 percent of all job losses in the manufacturing industry were directly tied to the implementation of robotics to increase efficiency and productivity and replace the humans doing that job currently. While the use of robots can lead to improved efficiency and earnings, there are questions as to how deeply robotics should be implemented within the manufacturing industry as a whole. For starters, should the entire workforce be automated? Should skilled laborers perform the more complex and specified tasks? These are some questions that haven’t yet been fully answered—and that makes the manufacturing industry’s future course uncertain. Robots are already being used to protect humans from the more dangerous and arduous tasks in the manufacturing industry. For example, mining operators are starting to have their workers remotely operate trucks to protect them from hazards inherent to that industry. The argument for and against the automation of manufacturing is one that has strong support from both sides. However, some – including Bill Gates – believe a “robot tax” currently being informally discussed in many corridors of business and politics could be the answer to robotic automation. The basic premise is that if a worker is replaced by a robot, the amount of income and Social Security tax would be assessed to the company replacing the human with the robot. The rationale is that the company would still be gaining a net profit from the replacement of the human worker while the government would still receive the lost taxes from replacing that worker. In speaking to this issue, Gates claims that this would slow the rapid growth of automation in the manufacturing industry and give human workers a chance to “catch up.” While the ultimate fate of a potential robot tax is yet to be determined here in the U.S., there are steps being made toward eventually adopting some form of it. South Korea is the first to officially implement such a tax. While its version is intended simply to reduce tax incentives for companies that automate their manufacturing processes, it is a clear step toward trying to stem the growth of the robot revolution. That said, South Korea isn’t trying to dissuade companies from using robots and more automated processes; rather, its efforts are intended to level the manufacturing industry equilibrium between tax revenue and improved manufacturing. While the future of this potential tax is uncertain, it’s always good to have an idea of what may happen in the future.

Belief, Maximizer, Adaptability, Learner, Input

Jim Honz

Tax Consultant + Former Shareholder

Jim Honz, Tax Consultant and Former Shareholder, built his career developing specialized expertise in tax advisory and business entity structuring. Known for his strategic approach and depth of knowledge, he has helped businesses navigate complex tax regulations and achieve their financial goals.

Throughout his career, Jim has focused on creating tailored tax strategies for clients, particularly in the agribusiness and manufacturing industry. His expertise extends to LIFO inventory methods, tax-exempt organizations, and export tax incentives (IC-DISC), where he has helped clients maximize savings and improve profitability.

While Jim has transitioned from his role as Tax & Consulting Shareholder, he continues to share his expertise with Lutz clients on a limited basis. He is available for scheduled consultations and can be reached via email for specialized tax planning needs, particularly during peak seasons.

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How Would a Robotics Tax Affect Manufacturing Businesses?

Jim Honz

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