By Paul Brandus
Robots don’t pay into Social Security. Maybe we should tax them instead.
Robots are deeply embedded in corporate America.
The basic construct of Social Security is this: Workers and their employers pay taxes. When a worker retires years later, those funds are paid back each month in the form of a Social Security check.
But what will happen to this 90-year-old model as robots and artificial intelligence reduce the demand for taxpaying human workers?
Rise of the robots
This is no hypothetical question. Robots are deeply embedded in corporate America, ranging from retail giants like Amazon (AMZN) (which just said it has more than a million robots on the job) and Walmart (WMT), to automakers, aerospace firms, pharmaceuticals, on and on. Even fast-food restaurants – often the first job for millions of Americans – are using robots to flip burgers. The list of industries and companies will only get longer.
And robots – which don’t call in sick, take bathroom breaks, take vacations or need healthcare – are a huge boon to employers. So is the tax code, which currently treats machines as capital equipment and not an employee. So companies get higher productivity and don’t have to pay Social Security taxes to Uncle Sam.
So as taxpaying workers are gradually replaced by robots or artificial intelligence, the strain on Social Security grows. Keep in mind that it is already being squeezed on both ends by longer lifespans and a U.S. birthrate which has sunk to a record low.
We’ve mentioned umpteen times that unless something is done, Social Security’s wobbly Trust Fund – paid by workers and their employers – could run out as soon as 2032. That would mean sharp cuts – perhaps as much as 24% of benefits.
We’ve also mentioned possible remedies: Raising the minimum age when someone could take Social Security (currently 62), raising the retirement age (67 for most people), or raising taxes on workers and employers, or lifting the cap on earnings that are subject to taxes in the first place. All involve politicians doing something they hate to do, and that is asking voters to make a sacrifice. That’s why no one has been able to do anything about Social Security in more than four decades. That’s where a “robot tax” could come in.
The robot tax
In a cruel irony, taxpayers have helped create this problem, by subsidizing, for years, billions in research and development for corporate America. As this R&D results in technology that displaces workers, should the robots and AI we helped develop be taxed, with revenue flowing back to those displaced workers?
Ancillary to this is growing talk of some form of universal basic income (UBI), which can be compared with Social Security in the sense that it would involve Americans getting money from the government each month.
Who would pay for this? Joe Taxpayer? What about corporations which have benefited the most from these technologies? Surely corporate America would fight any form of taxation or redistribution of wealth, right? Yet even in the high-flying tech industry, many prominent executives say something needs to be done about jobs that are being erased by technology. Among them: Elon Musk of Tesla (TSLA), SpaceX and X; Meta (META) CEO Mark Zuckerberg; Microsoft (MSFT) co-founder and philanthropist Bill Gates; and venture capitalist Marc Andreessen. Others have actually put their money where their mouth is. Sam Altman, the chief executive of OpenAI (creator of ChatGPT) gave 1,000 people $1,000 a month for three years to study the feasibility of UBI.
How might this be financed? Andrew Yang, previously an unknown businessman, made a splash during his presidential run in 2020 when he floated a $1,000-a-month “freedom dividend,” to be given to every adult and financed partly through a national value-added tax (VAT). But if Congress won’t raise taxes to prop up Social Security, what makes anyone think it would pass a VAT tax?
And not everyone is a fan of such wealth redistribution.
Universal basic income is “one of the worst possible responses” to automation, tech billionaire Mark Cuban has said. Instead, Cuban has suggested more traditional approaches, like greater investment in AmeriCorps, a federally subsidized program that places workers in full- or part-time positions providing social support services to communities. He also says investment in basic education and skills training should be increased.
Whatever the approach, no one doubts that waves of new technology will continue to eliminate jobs. But hasn’t this always been the case? The famed Pony Express, which rushed the news of Abraham Lincoln’s election to California in November 1860, went out of business less than a year later, after the telegraph made coast-to-coast communications infinitely faster. At the turn of the 20th century, 40% of Americans worked on farms. Today? About 1.2%. The automobile wiped out horse-and-buggy manufacturers. Advances in numerous sectors brought about similar disruption. These greater economic efficiencies spurred migration to new jobs in new industries, and a gradual rise in our standard of living.
And yet economic disruption will never be without pain, particularly for older workers who have less time to learn new skills and recover from a job setback. This makes our existing social safety net more important than ever.
Social Security – which for tens of millions of Americans is the only income they have – must be preserved. But as its tax base continues to be eroded by waves of robots and increasingly sophisticated artificial intelligence, something must be done. The sooner the better.
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-Paul Brandus
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11-20-25 1303ET
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