How will we pay for the Freedom Dividend?

A thousand dollars a month for every U.S. Citizen age 18 and over will cost about $2.1 trillion. Here’s how we’ll pay for it:

How to pay for $1,000/month for every American adult
How to pay for $1,000/month for every American adult
  1. Value Added Tax (VAT) of 10%, about half the typical rate in Europe. This generates about $800 billion/year.
  2. Welfare overlap: people currently receiving benefits will receive the Dividend instead. They can also opt to keep their current benefits and not receive the Dividend. Either way, this will save about $600 billion/year, through the consolidation of some welfare programs. This is money that we already spend.
  3. The Dividend does not disappear. It goes directly into the hands of individuals, who will spend it. That spurs job creation and economic growth to the tune of $600 billion/year.
  4. Reduced poverty expenses like burdens on hospitals and public safety, which will be greatly reduced when everyone has $1000/month. This saves about $200 billion/year.
  5. A carbon fee & dividend generates about $100 billion/year.
  6. A modest financial transaction tax generates about $50 billion/year.

In the end, we’ve raised about $2.35 trillion — that’s more than we need. [1]

VAT?

A Value-Added Tax (VAT) is a tax on the production of goods or services a business produces. It is a fair tax and makes it much harder for large corporations, who are experts at hiding profits and income, to avoid paying their fair share. A VAT is nothing new. 160 out of 193 countries in the world already have a Value-Added Tax or something similar, including all of Europe which has an average VAT of 20 percent. [3] Andrew Yang’s proposal is fully funded with a VAT of half that level, about 10 percent.

The biggest winners from automation, AI, and other technology cannot get away from a VAT, even if they reduce their workers and end up paying little in income taxes. That means a VAT gives you a slice of every Amazon transaction, every Google search, every Facebook ad, every Uber ride. We should be cheering the efficiency gains brought by technology and innovation, and with the VAT, we can—because a portion of most goods and services will come right back to you every month in your Freedom Dividend.

New revenue?

Putting money into the hands of American consumers would grow the economy.  The Roosevelt Institute projected that the economy would grow by approximately $2.5 trillion and create 4.6 million new jobs.  This would generate approximately $500 – 600 billion in new revenue from economic growth and activity. [3]

Savings?

We currently spend over one trillion dollars on health care, incarceration, homelessness services and the like.  We would save $100 – 200 billion as people would take better care of themselves and avoid the emergency room, jail, and the street and would generally be more functional.  Universal Basic Income help people avoid our institutions, which is when our costs shoot up.  Some studies have shown that $1 to a poor parent will result in as much as $7 in cost-savings and economic growth. [3]

References:
[1] How does Yang’s UBI work?
[2] Andrew Yang – Fox Business @ 3:10
[3] What is UBI? (yang2020.com)

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