How Will Andrew Yang Pay for Universal Basic Income?

Andrew Yang, an American entrepreneur, philanthropist, author, politician, and lawyer, has proposed implementing a Universal Basic Income (UBI) policy known as the Freedom Dividend. This proposal aims to provide every adult citizen with a monthly benefit, aiming to simplify the welfare system and stimulate economic growth. However, one of the most critical questions is how to finance such a significant fiscal initiative. In this article, we will explore the proposed methods and their potential effectiveness.

The Role of Taxes in Financing UBI

Yang's vision for financing UBI is multifaceted, primarily relying on tax reforms and other economic measures. A key proposal is the implementation of a 10% Value Added Tax (VAT) to generate the necessary funds. According to Yang, the implementation of UBI will stimulate economic activity, thereby increasing tax revenue. By introducing this tax, even those who do not currently pay taxes would begin to contribute, thus increasing the overall tax base.

Financial Streams to Fund UBI

Yang has outlined several potential sources of funding, ranked by their projected financial yield:

1. Tax Reforms and Reorientations

The first method involves removing the lowest income tax brackets, ensuring that everyone starts paying VAT from the very first dollar earned. This approach would democratize tax contributions and ensure that the benefits of UBI are broad-based.

2. Redirecting Welfare Programs to UBI

The next step involves redirecting the majority of funds currently allocated to welfare programs into UBI. This redirection would centralize and streamline social welfare, redirecting support away from complex and often inefficient welfare programs and towards a universal basic income. Exceptions could be made for the support of disabled individuals who require additional assistance.

3. Environmental Tax Revenues

Another significant source of funding would come from redirecting all revenue from carbon taxes and other environmental levies into UBI. These funds are currently used for various environmental initiatives but could be reappropriated to support all citizens.

4. Reallocation of Military Spending

For a U.S. specific focus, a reduction in the military budget by 50% is proposed, maintaining a formidable and best-equipped military force. This reallocation could be seen as an opportunity to balance defense and social spending, making the nation more economically balanced and socially supportive.

5. Business and Consumption

As the economy benefits from UBI, with 80% or more of the funds immediately spent on consumption, many businesses would see an increase in profits. This rise in business activity would lead to a general increase in business tax revenue for the government, thus providing another significant fiscal benefit.

The Potential Benefits of UBI

The long-term benefits of UBI are vast. By improving the financial stability of low-income individuals, UBI could lead to a larger and more stable economy. Furthermore, it could encourage business growth, as companies see increased consumer spending and demand. This not only leads to better-paying jobs but also stabilizes the economy in a way that traditional welfare programs do not.

The Role of Central Banks and Mutual Funds

To further fund and stabilize the UBI system, Yang suggests leveraging central banks and establishing a massive mutual fund. This approach would involve the central bank engaging in debt-based financing, which can be used to invest in the mutual fund. The mutual fund would be diversified to ensure that the revenues generated from these investments can be sustainable and can support UBI increasingly over time.

Conclusion

The implementation of UBI requires a comprehensive approach to funding, involving various economic reforms and reallocations. By combining tax reforms, welfare redirection, environmental levies, and strategic spending cuts, the financial base for UBI can be established. As the economy and consumer base grow, sustained economic mechanisms like a mutual fund can further support the financial sustainability of UBI in the long term.

About Andrew Yang:Andrew Yang, currently at 600,000 net worth, first gained widespread recognition in 2019 as a Democratic candidate for President of the United States. He is known for his platform of Universal Basic Income, which he calls the Freedom Dividend, and has a dedicated following of supporters passionate about this policy.