September 19, 2018
TAX WHAT YOU WANT; NOT WHAT YOU DON'T:
Robots or Jobs? The Tax Law's Uncertain Impact on Communities: State and local leaders need to pay a lot of attention to how businesses take advantage of the federal law's capital-investment provisions. (Donnie Charleston, 9/19/18, Governing)
Our economy has been moving for quite some time toward a new normal whereby capital investment, job growth and wage growth are increasingly disconnected from one another.This is reflected in a number of underlying trends. One of those is the evolving structure of our economy, which now features more knowledge-based firms that exhibit huge productivity numbers while relying on relatively few workers. Another trend is industries adopting automation and machine-learning technologies that replace human inputs. This is where full expensing becomes important. As the Wall Street Journal reported earlier this year, nearly half of manufacturers added automation in 2017 -- before the new tax law's full-expensing provision took effect.And there are other industry-level automation trends underway that we should be paying attention to. MIT economist David Autor's research shows, for example, that workers are contributing less added value to the final products they produce, a decline due to increased automation.What does all of this mean for local governments? That will depend on the structure of the local economy. As Autor notes, the adoption rate of labor-saving technologies differs by industry, and by extension it differs across geography. So it's time for state and local government leaders to start analyzing automation trends in each of their major industries and sub-sectors, paying particular attention to those with the highest level of automation or robot penetration, including transportation, plastics and chemicals, metals, food, and electronics.
The point of an economy is to create wealth, so we ought not disincentivize productivity/profits.
Posted by Orrin Judd at September 19, 2018 8:27 AM