So, universal basic income. The holy grail of my progressive policy platform. An issue I've been passionate about before I started this blog. And now we have a candidate who is running on it as the central part of his platform. I discussed Yang a couple times on this blog, but I never really delved into his numbers. Since I am opinionated on basic income I decided I would analyze his funding strategy for passing UBI, as well as improve it by taking aspects of my previous funding numbers as well as other policies that would help give us a robust funding strategy for UBI.
I also feel this is a necessary step of improving my own numbers because if you guys remembered, I was overly ambitious thinking I could reform the entire tax code into a flat tax. Honestly, I think what I'm coming up with here might be better.
Without further ado, let's look at Yang's platform.
Like me, Yang wants a UBI of around $1000 a month for all adults. He varies from my position in the sense he does not allow a grant for children though, and because he assumes seniors can just go on social security, ignoring that many people might actually make less on social security than UBI if their lifetime contributions are too low. These restrictions do admittedly save money and likely reduce the cost of UBI down to around $2 trillion or so, but I believe that it would introduce coverage gaps that should not exist.
He believes we can save $500-600 billion by eliminating welfare, which doesn't seem too unreasonable. However, he does give people the option to reject UBI and stay on welfare if their benefits are more generous. This makes sense but also makes the UBI numbers more fuzzy. He might be saving a lot less money in eliminating welfare, but because those who choose to remain on welfare would be forgoing UBI, it would also mean UBI would cost less in the first place. So this is fair, but it's also unclear how the numbers would work.
He supports a 10% VAT or value added tax. He believes a 10% VAT would raise $800 billion in revenue. Let's take him at his word as I don't know what it would be. While this sounds about right based on my understanding of the size of the economy, VAT is essentially a consumption tax. Consumption taxes are passed onto consumers, and make goods more expensive. This would devalue spending power, including that of those on UBI. Your $12,000 a year UBI is now worth $10,800. This isn't bad, but it is sub optimal. I will stick with this though when I go into my own modified funding plan that builds on Yang's though.
He believes that $500-600 billion could be raised from new revenue from economic growth from UBI. UBI causes consumption, which raises demand, which creates jobs. This is true, but I do think this is shaky and kind of the same argument trickle down economics people make. Budget deficits don't matter because the economy will grow and we'll get all of this new revenue. It never works out and we get deficits as a result. He might be onto something, but this isn't a good argument to make.
Finally, he believes that we could save on "healthcare, incarceration, homeless services, and the like" and estimates savings $100-200 billion. I don't deny this is true. Heck it's a common argument UBI supporters have been making for years. But will we save $100-200 billion on the federal level? That is the question. The savings might be had at state and local government levels, as well as in the private sector. This won't be free revenue on the federal level for UBI.
That said, Andrew Yang's UBI platform has some glaring holes and fuzzy math in it. It's not necessarily wrong, but some of the assumptions he makes are questionable. That said, I would like to try to take a stab at making a better UBI program than he has, taking my past work on the subject and revamping his numbers.
How to fund a UBI
First of all we need to figure out how many people are living in the US. There are approximately 248 million adults living in the US, and approximately 73 million children. Let's start by assuming we're going to give $1000 a month to every adult over 18 who is not an illegal immigrant or incarcerated. I will modify social programs as necessary to make this work. I will also consider a small UBI for children if I can make the numbers work and deem it necessary. There are currently 11 million illegal immigrants in the US, and 2 million people are in prison. This brings the total adults eligible for UBI down to 235 million. This means we would need to raise $2.82 trillion to fund UBI. This seems like a lot, but let's look at how we can do this.
So I would start off with Yang's VAT and pin it at $800 billion like he does. This would account for a good part of the cost in and of itself.
Looking at the most recent report of the Bureau of Economic Analysis, people made $8.49 trillion in wages and salaries in the past year. If we added a 10% income or payroll tax, I would prefer payroll as it would remove the money without the need to pay all at once at the end of the year and be more painless for the end users, we could raise $849 billion.
Looking at other sources of income like proprietor's income, of which only around 20% is taxable based on my previous work, rental income, and personal income receipts on assets, which is basically capital gains, if we applied the same 10% tax to that stuff, we could raise an additional $348 billion.
Putting this all together, we are already up to just short of $2 trillion. We only need to raise an additional $823 billion or so in revenue. So at this point, let's shift to social programs.
It's a common trope on the right that people on welfare can make up to $43,000 in benefits, but the reality is far more complicated. Single moms are only getting $6648 in cash benefits, which UBI would just flat out eclipse. They're also only getting $6249 in food stamps, $275 in heating assistance, $300 in additional food assistance, and $1156 under WIC. And that's only if they qualify for all of that. We could probably eliminate all of that with most people being better off. I would keep medicaid's $11,302 in benefits though as I support medicare for all as well, and also the $12702 in housing subsidies because UBI can't replace that. But as far as the other benefits, I think they can go. Based on this chart, this means we could save $269 billion while still leaving medicaid, housing, and unemployment (which I will get to) alone.
With social security, and disability, I would only be comfortable with eliminating roughly 35% of the programs. With social security the maximum benefit people can get is $2861 a month. If we cut it to $1861 and give these people a $1000 UBI, we could save 35% from the program and scale the program down from there. This would leave people at the maximum making what they make now while making those below the maximum better off. Considering how social security costs around $1.052 trillion a year, that would raise $368 billion in this way.
With unemployment I would do something similar. The maximum amount between states and how generous the programs are varies a lot, but if we general cut 35% like with social security, most people would be better off than they are now, and we would save an additional $12 billion.
Adding all of this up, we get $2.646 trillion in raised revenue. We are only $174 billion short. We could fill this gap and raise a lot of revenue doing a bunch of things. I came across this post today in relation with Bernie's ideas and there are a lot of valid funding strategies here. To point out a few in particular:
We could raise $488 billion by repealing the Bush tax cuts. This would fill in the gap and also likely raise enough money to fund a smaller UBI for children, which would likely cost around $292 billion.
We could raise between $75 billion and $300 billion with a carbon tax.
We could raise $275 billion with Elizabeth Warren's wealth tax idea.
Bernie Sanders has many different proposals to raise revenue for medicare for all that could help.
The list goes on and on. It's really a matter of taking our pick of which taxes we prefer and what programs we want to fund. Heck we could likely fund medicare for all and basic income and probably have a tax scheme similar to your typical Scandinavian country at this point...and for most people, basic income would refund a lot of those taxes. That 10% payroll tax? You won't be losing money until you make more than $120,000 a year. If you count the VAT as well, you still will be in the clear until you make more than $60,000. This is WAY more progressive and less burdensome on working families than my previous proposal. That said, I really think this could work.
To summarize, for those who don't want to read all of that
We need $2.82 trillion to fund UBI for all adults:
$800 billion would come from Yang's 10% VAT
$849 billion would come from a 10% payroll tax
$348 billion would come from a 10% tax on other forms of income
$281 billion would come from cutting social programs and replacing them
$368 billion would come from cutting parts of social security and replacing it
This would give us $2.646 trillion in funding. From there we could raise the additional revenue from a plethora of possible taxes including higher taxes on the rich, a carbon tax, or various spending cuts elsewhere. So we got this covered.
I think this would be a much better proposal than both what Yang is offering, which seems to rely on fuzzy math at times, and my own previous proposal which may have been too ambitious with trying to reform our entire system into a 45% flat tax. It would be far more incremental, and much more progressive for most people, leaving more money in their pockets.
No comments:
Post a Comment