Automation and the Income Tax

Soled, Jay A.; Thomas, Kathleen DeLaney

Technological advancements are playing a transformative role in curtailing the need for labor. These very same forces are catapulting capital in the form of robotics, machinery, and intellectual property to the economic forefront. In virtually every sphere of human existence, labor’s decline and capital’s rise have been widely felt. In short, automation has become society’s new focal point.

Notwithstanding the magnitude of these changes, Congress appears committed to retaining its historic pattern of taxing labor income more heavily than it taxes income derived from capital. However, as technology continues to evolve and capital gradually eclipses labor’s role in the economy, a fundamental shift in the tax system will be needed to maintain a viable revenue stream.

This Article explores the ways that automation has impacted the tax system in terms of efficiency, fairness, and revenue. It concludes that our twentieth-century tax system is unsustainable in the twenty-first century. It then offers proposals for how policymakers should reform the tax law to account for labor’s decline and capital’s rise. Among other things, the technological era requires that all income—regardless of source—bear a similar tax burden.

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Columbia Journal of Tax Law

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November 13, 2019