Does the US Tax Code Favor Automation? | 2020
Joint with Daron Acemoglu and Andrea Manera
Prepared for the Brookings Papers on Economic Activity."
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 levels of automation beyond what is socially
desirable. 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 it is also beneficial
to impose 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
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.