Tax Incentives – Position Paper

Tax Incentives

Introduction

The increased use of artificial intelligence (AI), automation, and robotics presents both opportunities and challenges for the modern workforce. While these technologies hold immense potential for economic growth, efficiency, and increased productivity, their widespread adoption also fosters job displacement and income inequality across all communities. To address this challenge, governments must intervene strategically to mitigate the adverse effects on employment and the economy and to ensure a smooth transition to the future of work.

Position

Coazt proposes a government intervention strategy that includes tax credits for businesses that prioritize human workers over AI, automation, and robotics. By offering tax incentives to businesses that prioritize human employment, governments can support workers, foster job creation, and promote inclusive economic growth in the age of AI and automation, thus softening their negative impact on communities and the labor market.

Benefits

Tax credits for businesses that prioritize human labor are targeted interventions that encourage desired behavior without stifling business innovation.  Companies retain flexibility in hiring decisions, allowing them to adapt and embrace efficiency alongside human capital investment.  Additionally, tax credits are fiscally responsible, as a strong workforce translates to increased tax revenue and economic growth, while reducing the government’s reliance upon unemployment benefits and social programs to address job losses.  Finally, by encouraging human employment, this strategy fosters social cohesion and reduces income inequality.

Here are some of the beneficial outcomes that can be achieved through the implementation of tax credits:

Preservation of Human Employment

  • By making human workers more cost-competitive with automation, tax credits encourage businesses to maintain a healthy balance between human labor and automation, mitigating unemployment risks and ensuring workers remain central to production.

Promoting Job Creation

  • Targeted credits incentivize businesses to hire humans, particularly in sectors most vulnerable to automation, leading to increased employment opportunities and a reduced reliance on automation-driven labor displacement. Tax revenues will rise as more individuals are employed in a community.

Fostering Skills Development

  • Tax credits can be linked to workforce development initiatives, encouraging businesses to invest in upskilling and reskilling their employees, preparing them for the demands of the future workplace.

Ensuring Inclusive Economic Growth

  • Tax credits can promote inclusive economic growth by supporting human employment across all sectors and skill levels. They can help distribute the benefits of automation more equitably, ensuring all workers have access to meaningful opportunities and decent wages.

Implementation Considerations

Balancing Innovation

  • Policymakers need to strike a balance between encouraging technological progress and safeguarding jobs.

Impact Assessment

  • Conduct a comprehensive impact assessment to understand the potential effects of AI, automation, and robotics on employment across different industries and regions.  This assessment should identify which sectors are most vulnerable to job loss and displacement and prioritize them for intervention.

Targeted Approach

  • Implement targeted tax incentives that focus on industries and businesses most affected by AI, automation, and robotics. This may include sectors where these technologies are likely to lead to significant job displacement, such as marketing and advertising, entertainment / media production, manufacturing, transportation, and customer service.

Phased Approach

  • Gradual introduction of tax credits allows businesses to adapt without disruption.

Long-Term Strategy

  • Develop a long-term strategy for addressing the impact of AI, automation, and robotics on employment. Tax incentives should be part of a broader strategy that includes investment in education and skills development, support for displaced workers, and efforts to promote job creation in emerging industries.

Incentive Design

Design tax incentives in a way that encourages businesses to prioritize human employment over automation.  This may include offering tax breaks and credits to companies that maintain or increase their human workforce or invest in employee training and upskilling.

Monitoring and Evaluation

Establish mechanisms for monitoring and evaluating the effectiveness of tax incentives in mitigating job loss and displacement.  This may include tracking changes in employment levels, assessing the impact on different industries and regions, and soliciting feedback from businesses and workers.

Fiscal Sustainability

  • Ensure that tax incentives are fiscally sustainable and do not place an undue burden on government finances. This may require offsetting the cost of tax incentives through other revenue-raising measures or ensuring that tax incentives are targeted at the most effective interventions.

Stakeholder Consultation

Consult with stakeholders, including businesses, workers, industry associations, and academic experts, to ensure that tax incentives are designed in a way that addresses the needs and concerns of all parties.  This may involve soliciting input through public consultations, advisory committees, and other forums.

National and International Cooperation

  • Coordinate with other governments and international organizations to develop a coherent approach to addressing the impact of AI, automation, and robotics on employment. This may involve sharing best practices, harmonizing tax incentives, and collaborating on research and development initiatives.

Examples

United States

  • The Work Opportunity Tax Credit (WOTC) provides tax incentives to employers who hire individuals from specific target groups that have historically faced barriers to employment, including veterans, ex-felons, and individuals receiving government assistance.  This tax credit encourages employers to hire individuals who may be at risk of job displacement due to automation and technological advancements.

Conclusion

Offering tax incentives to businesses that prioritize human employment over automation represents a proactive and balanced approach to mitigating the potential adverse effects of AI, automation, and robotics on the workforce.  By incentivizing companies to maintain a strategic balance between human labor and technological capabilities, promote job creation, invest in upskilling initiatives, and foster inclusive economic growth, such tax credits can help reconcile the imperatives of technological advancement with social responsibility.  This measured strategy facilitates a synergy between human ingenuity and technological innovation, paving the way for a more equitable and sustainable future of work.  Governments can thus harness fiscal policy as a catalyst for shared prosperity, ensuring that the transformative impact of automation translates into broad-based economic empowerment and societal resilience.

Sources

1. U.S. Department of Labor, Employment and Training Administration. (n.d.). Work Opportunity Tax Credit. Retrieved from https://www.dol.gov/agencies/eta/wotc