LUTZ BUSINESS INSIGHTS
How Would a Robotics Tax Affect Manufacturing Businesses?
JIM HONZ, TAX SHAREHOLDER
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.
ABOUT THE AUTHOR
JIM HONZ + TAX SHAREHOLDER
Jim Honz joined the firm in 1984 and currently serves as a Tax Shareholder. His areas of expertise include export tax incentives (IC-DISCs), choice of business entity, and methods of accounting (including Lifo Inventory). In addition, Jim works with tax-exempt organizations on tax and organizational issues.
AREAS OF FOCUS
AFFILIATIONS AND CREDENTIALS
- American Institute of Certified Public Accountants, Member
- Nebraska Society of Certified Public Accountants, Member
- Certified Public Accountant
- Silver Medal on CPA Exam for second highest score
- BSBA in Accounting, Creighton University, Omaha, NE
- Catholic Charities, Past Board Member/President
- Nebraska Organ Recovery System, Inc., Board Member/Treasurer
- Creighton University Financial Advisory Committee, Past Alumni Member Appointed by CU President
- St. Wenceslaus Church, Elected Parish Council Member (Vice President), Chairman of Finance Committee
- Creighton University Accounting Department, Past Advisory Board Member
- SIDs 398 (Pacific Springs) & 189 (Georgetown), Elected Trustee/Chairman
- NSCPA, Political Education Committee Member
- 5 Tax Tips for Manufacturers
- Tax Cuts & Jobs Act + Ag Industry
- 2019 Manufacturing Outlook Survey Results
- How Would a Robotics Tax Affect Manufacturing Businesses?
- Additive Manufacturing Has Many Tax and Accounting Implications
- 2018 Manufacturing Outlook Survey Results
- Reformation of Valuation Discounts
- 2017 Manufacturing Outlook and Insights
- What are IC-DICS?
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