Working Paper: NBER ID: w27052
Authors: Daron Acemoglu; Andrea Manera; Pascual Restrepo
Abstract: We argue that the US tax system is biased against labor and in favor of capital and has become more so in recent years. As a consequence, it has promoted inefficiently high levels of automation. Moving from the US tax system in the 2010s to optimal taxation of capital and labor would raise employment by 4.02% and the labor share by 0.78 percentage points, and restore the optimal level of automation. If moving to optimal taxes is infeasible, more modest reforms can still increase employment by 1.14–1.96%, but in this case efficiency can be increased by imposing an additional automation tax to reduce the equilibrium level of automation. This is because marginal automated tasks do not bring much productivity gains but displace workers, reducing employment below its socially optimal level. We additionally show that reducing labor taxes or combining lower capital taxes with automation taxes can increase employment much more than the uniform reductions in capital taxes enacted between 2000 and 2018.
Keywords: Taxation; Automation; Labor Economics; Economic Policy
JEL Codes: J23; J24
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| US tax system is biased against labor (H31) | excessive automation (L23) |
| moving from current tax system to optimal taxation (H21) | increase employment (J68) |
| moving from current tax system to optimal taxation (H21) | increase labor share (E25) |
| moving from current tax system to optimal taxation (H21) | reduce range of automated tasks (L23) |
| implementing an automation tax (H26) | improve welfare (I30) |
| reducing labor taxes or combining lower capital taxes with automation taxes (J89) | greater increases in employment (J68) |