Taxing R2-D2? ABA Tax Section Panel on Automation and AI

Kerry Ryan
Associate Professor
St. Louis University School of Law

I had the pleasure of attending the midyear meeting of the ABA Tax Section this past weekend in San Diego. The Tax Policy & Simplification committee organized an interesting panel entitled: “Taxing R2-D2: How Should We Think About the Taxation of Robots and AI.” The panel was organized and moderated by Surly’s own Leandra Lederman, and panelists included Shu-Yi Oei (Boston College), Roberta Mann (Oregon Law), and Robert Kovacev (Steptoe & Johnson LLP).

For those of you who read Shu-Yi’s post, you know that she is “deeply skeptical” of the “robot tax” frame. At best, it is misleading—no one is attempting to impose a tax on a “robot” (whatever that is?) per se. As Robert Kovacev succinctly put it: “robots don’t pay taxes, people pay taxes.” The key question is which people: owners, workers, and/or consumers? Roberta linked this question to the long-standing debate about who ultimately bears the burden of the corporate income tax.

At worst, the “robot tax” terminology captures (and perhaps amplifies) the fear (“the robots are coming!”) and angst driving much of this discussion. The underlying concern relates to the potential negative impact on labor of increased utilization of technology/artificial intelligence (AI)/automation in the production process. Experts disagree about whether, over the longer term, automation will reduce the number, or merely the type, of human workers. The unanswered question is whether this is just the next in a long line of technological shifts in the economy dating as far back as the Industrial Revolution, or whether AI/machine learning truly represents a technological tipping point.

What is clear is that the transition to this new automated workplace may lead to worker displacement (particularly for those in manual/routine jobs). Mass unemployment could negatively impact the tax base—fewer workers mean fewer taxpayers. Notice that any revenue loss would hit at the same time as funding demands increased for re-training and/or social protection programs (existing and/or proposed universal basic income) for displaced workers.

Assuming you believe there is a problem(s), what is the policy prescription? While most of the panelists agreed that tax has a role to play here, they disagreed as to the contours of that role. Should we plug the hole in the income tax base by shifting more of the tax burden onto capital, as opposed to labor? Do we attempt to tax work completed by robots in the same manner as comparable work by employees (see Bill Gates proposal)? Should we raise the overall level of taxation (under existing or new tax structures)? Do we view automation as imposing negative externalities on the labor market and impose some type of Pigouvian tax? Should we attempt to slow the pace of technological development, rather than workplace implementation, by reducing either direct funding or tax incentives for R&D and innovation (see South Korea)?

Many interesting questions with no easy answers. At the very least, we must resist allowing zeitgeist to drive the policy response, while at the same time affirming the legitimacy of the underlying concerns and working to minimize their negative consequences on workers and their families.

#TaxValentines

Heart1By: Leandra Lederman

It’s the time of year when tax experts are Twitterpated! Yes, on tax Twitter, it’s not Singles Awareness Day, but rather time for #TaxValentines! Twitter member Jeremy Cape reportedly started them a few years ago. Many of the valentines take the traditional format of the classic love poem, such as this never-before-tweeted basic tax valentine:

Roses are red

Violets are blue

I adore taxes

And I also love you

 

I like to play with the second line, such as in this one that I tweeted last year:

 

This next one plays with “rose” and is also a public service announcement:

 

Some of the tax valentines include plays on words, political commentary, and/or comments on recent tax developments. Here’s an example, with my follow-up, too:

Continue reading “#TaxValentines”

What’s Up with the Sharing Economy? (Report from the 13th International Human Rights Researchers Workshop)

By: Diane Ring

Sometimes we do get what we are seeking. In some of my recent work on the sharing economy I have advocated for more discussion and analysis across legal boundaries, so that the rules we develop have outcomes that more closely match our goals and don’t bring unexpected—and undesired—surprises. The two-day conference on “Sharing Economy: Markets & Human Rights” that I have been attending at the College of Law and Business in Ramat Gan, Israel has provided just such an opportunity. The papers presented cover a wide range of legal fields and issues from taxation to discrimination, and will ultimately be published together in the Law & Ethics of Human Rights Journal. Although we are all benefiting from the discussion of our drafts and will continue to revise our work, some interesting themes have emerged already . . .


Continue reading “What’s Up with the Sharing Economy? (Report from the 13th International Human Rights Researchers Workshop)”

Feminist Judgments: Rewritten Tax Opinions

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Tax-gift giving this holiday season just got so much easier!! Look what arrived just in time to celebrate the end of 2017! The FIRST in a series of subject-matter volumes of US Feminist Judgments is the Feminist Judgements: Rewritten Tax Opinions.

Featuring fantastic contributions by Surly Subgroup colleague Professor of Law Jennifer Bird-Pollan and dream team editors: James D. Hopkins Professor of Law Bridget J. Crawford and Buchanan, Ingersoll & Rooney Faculty Scholar, Gender, Sexuality & Women’s Studies Faculty (affiliate) and Professor of Law Anthony C. Infanti,

Commentary and rewritten tax opinions by Tax Professors and Scholars Extraordinaire Appleberry, Beale, Bird-PollanBrennen, Cain, Christensen, Cords, Cruz, Drumbl, Fellows, Gerzog, Heen, Knauer, Lahey, Lipman, Maynard, Murphy, Pratt, RobinsonRobson, Tait, Thompson, and Waterhouse Wilson.

Continue reading “Feminist Judgments: Rewritten Tax Opinions”

A Mother’s Holiday Letter to Uncle Sam

Dear Mr. Tax Man, Uncle Sam, Sir:

I am writing this letter in December on my ten-minute break at work.  I apologize for my rushed handwriting and the tardiness of this letter. I don’t have access to a computer, except for short periods (only 15 minutes per session) at the library.  And the lines have gotten too long for me to wait while my three wiggly kids struggle to sit still (only to be hushed by the library staff and patrons every few minutes). I have been really busy balancing my new jobs with the kids’ schedules, especially with the holidays and all the stress and craziness that they add. Continue reading “A Mother’s Holiday Letter to Uncle Sam”

Crip the Code*

By Francine J. Lipman

*Attribution, respect and applause to #CriptheVote Disability Visibility Project community organizers and activists.

images-7“[W]ork is a valued activity, both for individuals and society; and fulfills the need of an individual to be productive, promotes independence, enhances self-esteem, and allows for participation in the mainstream of life in America.”  Rehabilitation Act of 1973
Continue reading “Crip the Code*”

Tax Reform in an Age of Sexual Harassment

Tax reform is, in many ways, a product of its time. So I guess it shouldn’t surprise anybody that the late-2017 tax reform effort would somehow intersect with the post-Weinstein revelations of rampant sexual harassment and assault by powerful men.

And yesterday it happened: Senator Ken Buck introduced an amendment to H.R. 1. Under his proposed amendment, businesses would no longer be permitted to deduct payments for legal settlements, costs, fines, and fees associated with sexual harassment or sexual assault.  Continue reading “Tax Reform in an Age of Sexual Harassment”

The Senate Tax Bill’s “Clarification” of Independent Contractor Status: Tax and Employment Law Tradeoffs

By: Diane Ring

Shu-Yi Oei and I have been tracking the recent tax reform developments as well as a couple of proposed tax bills that deal with worker classification, information reporting, and tax withholding. Based on a description prepared by the Joint Committee on Taxation, it looks like the Senate Tax Bill is going to include a new safe harbor provision guaranteeing worker classification as an independent contractor and will make changes to independent contractor withholding and information reporting. We posted our analysis of this proposal and its potentially serious implications on TaxProf Blog: The Senate Bill and the Battles Over Worker Classification.

Our main points:

1. Not just tax: This worker classification safe harbor is not just about tax, it will likely have impacts on employment/labor law outcomes and protections as well.

2. Not just gig workers: Based on the Joint Committee description, the proposal is not limited to gig economy workers —anyone who meets the safe harbor requirements (which are pretty easy to satisfy in many cases) can be classified as an independent contractor. This may have the effect of encouraging employers to push workers into work relationships that come within the safe harbor. Or, in certain cases, it may facilitate the strategic movement of higher-income workers into independent contractor status — see point 4 below.

Continue reading “The Senate Tax Bill’s “Clarification” of Independent Contractor Status: Tax and Employment Law Tradeoffs”

Paradise Papers: Day 2

By: Diane Ring

The most recent big financial data leak, dubbed the Paradise Papers, is now in full swing in the media. On Monday, Shu-Yi Oei blogged the initial release and its immediate takeaways (including the revelation that U.S. Commerce Secretary Wilbur Ross continued to hold investments in a shipping business that had business connections to key Russian figures). But each passing hour brings new information and individuals into the public spotlight – and in the process sheds light on how such information is likely to be used and what the media and the public seem to find most noteworthy.

So what did Day 2 bring? . . .

Continue reading “Paradise Papers: Day 2”

Some Initial Thoughts on the Paradise Papers Leak

Shu-Yi Oei

Another data leak broke on Sunday, November 5, while I was on a plane home from Bergen, Norway. Coincidentally, Diane Ring and I were in Bergen presenting our Leak-Driven Law paper at a tax conference organized by Max Planck Institute for Tax Law and Public Finance, Norwegian Centre for Taxation, and Notre Dame University.

This new “Paradise Papers” leak involves a set of 13.4 million records from 1950 to 2016.

From the ICIJ’s website:

“The new files come from two offshore services firms as well as from 19 corporate registries maintained by governments in jurisdictions that serve as waystations in the global shadow economy. The leaks were obtained by German newspaper Süddeutsche Zeitung and shared with the International Consortium of Investigative Journalists and a network of more than 380 journalists in 67 countries.”

The two offshore services firms in question are the offshore law firm Appleby and Asiaciti Trust, an offshore specialist headquartered in Singapore. Over 7 million of the records came from Appleby and affiliates.

Diane and I argued in Leak-Driven Law that (1) the high-salience and shocking nature of tax and other leaks and (2) the interventions of the press and other actors in processing, framing, and generating publicity about these leaks are important features that can affect how legal responses and reactions occur in the aftermath of a leak. We’ll be keeping track of how events unfold in the aftermath of this latest leak and how it fits or doesn’t fit with the observations in our paper:

Some initial notes and reactions:

This was at Least in Part a Cyber Hack.

Most of the news coverage I’m seeing is focused on the content on the leak, but it’s worth noting that at least with respect to Appleby, this new leak was in part a result of a cyberattack on Appleby that happened last year. I haven’t seen anything to suggest that this was a data theft by an insider (e.g., employee) turned whistleblower. In its response to the leak, Appleby defended itself and noted the challenges of cyber-crime for individuals and businesses.

The Appleby Hack Occurred in 2016.

Continue reading “Some Initial Thoughts on the Paradise Papers Leak”