How MIT’s “Work of the Future” Project Gets It Wrong: Raising Taxes on Machinery and Software Would Kill Jobs and Hamper Wage Growth

October 5, 2020

The most important determinant of a nation’s economic wellbeing is the growth in per-capita GDP. The principle way that growth occurs is through productivity growth. And a principle way productivity grows is through automation technology.


Because a suite of new and improving technologies has emerged, which ITIF has termed “CAS” (connected, automated, and smart), many believe that the long U.S. productivity growth drought could soon end. And if we’re lucky, productivity growth could increase to the rates enjoyed in the last half of the 1990s and the first half of the 2000s. But too many pundits, activists, and scholars have panicked, claiming automation will be all-powerful, and robots will mean the end of work. This in turn has led to an array of ill-informed and harmful policy proposals.


The latest case in this panic and neo-Luddite reaction: a new report from MIT’s “Work of the Future” project. The report, titled “Taxes, Automation, and the Future of Work,” is wrong in its analysis of the relationship between automation and employment; in its analysis of the relative taxes on labor and machinery; and most importantly, in its recommendation to increase the effective tax rate on machinery and equipment investments. Doing that would significantly lower wage growth and reduced U.S. international competitiveness.


This blog reviews major statements from the report (numbered in italics) and explains why each is wrong.