Optimal Taxation in the Automation Era

Ryota Nakatani and Hiroaki Miyamoto

No 710, CIS Discussion paper series from Center for Intergenerational Studies, Institute of Economic Research, Hitotsubashi University

Abstract: This paper studies the optimal tax-and-transfer policy when automation raises productivity but displaces unskilled workers. Using a general equilibrium model calibrated to the U.S. economy, we compute the steady-state social welfare-maximizing rate of each of four tax instruments: capital income taxation, unskilled wage taxation, taxation on automation capital (i.e., a robot tax), and consumption taxation. Following an increase in the productivity of automation-related capital, the welfare-maximizing capital income tax rate and robot tax rate are zero, as their long-run investment distortions outweigh their redistributive social benefits. In the baseline simulation, aggregate welfare is maximized by cutting the unskilled wage tax rate and, especially, the consumption tax rate. However, when unskilled labor and automation-related capital are highly substitutable, the optimal consumption tax rate increases, and the additional government revenue is redistributed to displaced unskilled workers.

Keywords: Automation; Optimal Taxation; Capital Income Tax; Labor Income Tax; Consumption Tax; Robot Tax (search for similar items in EconPapers)
JEL-codes: C68 E25 H21 H24 H25 O31 O40 (search for similar items in EconPapers)
Pages: 24 pages
Date: 2026-04
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Related works:
Working Paper: Optimal Taxation in the Automation Era (2026)
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Persistent link: https://EconPapers.repec.org/RePEc:hit:cisdps:710

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