Does the US Tax Code Favor Automation?

Daron Acemoglu, Andrea Manera and Pascual Restrepo

No 27052, NBER Working Papers from National Bureau of Economic Research, Inc

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.

JEL-codes: J23 J24 (search for similar items in EconPapers)
Date: 2020-04
New Economics Papers: this item is included in nep-acc, nep-gen, nep-lma, nep-pbe and nep-pub
Note: EFG LS PE
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Citations: View citations in EconPapers (20)

Published as Daron Acemoglu & Andrea Manera & Pascual Restrepo, 2020. "Does the US Tax Code Favor Automation?," Brookings Papers on Economic Activity, vol 2020(1), pages 231-300.

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