(Illinois Policy Institute)—As Amazon considers pulling its HQ2 out of New York City, Chicago is considering imposing a “robot tax” on companies looking to automate their way around high labor costs.
Chicago would impose a “robot tax” on companies as a penalty for automating, under a proposal that may soon get a hearing in the City Council.
Ald. Ameya Pawar, 47th Ward, announced Feb. 11 his intention to introduce a pair of “Amazon protection ordinances” before his self-imposed final term ends in May, according to the Chicago Sun-Times.
The proposals would include a steep fine – a “robot tax,” in Pawar’s words – for each job a company automates; and a “claw back” mechanism that would recapture public funds from companies that received taxpayer-backed subsidies for relocating to Chicago. Pawar told the Sun-Times the city would use robot tax revenue to “subsidize direct employment.”
Pawar said his ordinances are precautions in case Amazon withdraws from New York, as the online retailer’s “HQ2” site in Long Island City, Queens, faces a mounting political backlash. If Amazon revokes Long Island’s share of HQ2, Chicago could court the Amazon facility a second time.
Chicago landed on the e-commerce giant’s HQ2 shortlist last year after the company narrowed down 238 possible locations for the $5 billion investment. Then-Gov. Bruce Rauner and outgoing Mayor Rahm Emanuel courted Amazon with a $2.25 billion tax incentive package, putting up 10 Chicago-area locations.
Amazon ultimately split the 50,000-job investment between Crystal City, Virginia, and Long Island, with an additional 5,000-job operations center in Nashville, Tennessee. But the company’s ambivalence toward its Long Island plans has already encouraged both Emanuel and Gov. J.B. Pritzker to push Chicago back into the running for another possible HQ2 bid.
A statement issued by the company Feb. 14 said, “We do not intend to reopen the HQ2 search at this time. We will proceed as planned in Northern Virginia and Nashville, and we will continue to hire and grow across our 17 corporate offices and tech hubs in the U.S. and Canada.”
While automation displaces certain jobs, disruptive technologies create new ones. Boston University School of Law economist James Bessen points out that technological innovations enhance worker productivity. Taxing automation or “robots,” Bessen argues, would simply slow the necessary churn of job creation, prolonging the hardships of vulnerable workers.
Pawar’s proposed robot tax is another example of Chicago greeting innovation with hostility. In the midst of a nationwide food truck boom, Chicago’s heavy-handed regulatory environment nearly made them extinct in the Windy City. While other big cities welcomed mobile food trucks, a 2018 study by the U.S. Chamber of Commerce Foundation ranked Chicago among the least hospitable for mobile eateries.
Unfortunately, food trucks are not the only vehicles whose business has been made increasingly difficult by Chicago city code. Ride-sharing platforms such as Uber and Lyft also face burdensome regulations and tax hikes on their services. Chicago imposed a citywide ban on Vugo, a tech startup that allows ride-sharing drivers to supplement their incomes by displaying commercial advertisements in and on their vehicles. Fortunately, the Liberty Justice Center, representing Vugo in court, defeated the ban in December 2018.
The city is hardly more accommodating to short-term rental platforms such as Airbnb. Chicago passed an ordinance in 2016 that requires such services to obtain a license, maintain a database of registered listings and report updated user data to the city twice a month. The complexity of the process stopped more than 2,400 Airbnb hosts from listing their rooms last year.
Taxing robots is a novel concept, but Chicago would be wise to encourage innovations and their promise of new, better jobs.