It would be easier than you might think. Andrew proposes funding UBI by consolidating some welfare programs and implementing a Value-Added Tax (VAT) of 10%. Current welfare and social program beneficiaries would be given a choice between their current benefits or $1,000 cash unconditionally – most would prefer cash with no restriction.
A Value-Added Tax (VAT) is a tax on the production of goods or services a business produces. It is a fair tax and it 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.
The means to pay for a Universal Basic Income will come from 4 sources:
1. Current spending. We currently spend between $500 and $600 billion a year on welfare programs, food stamps, disability and the like. This reduces the cost of Universal Basic Income because people already receiving benefits would have a choice but would be ineligible to receive the full $1,000 in addition to current benefits.
Additionally, 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 would pay for itself by helping 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.
2. A VAT. Our economy is now incredibly vast at $19 trillion, up $4 trillion in the last 10 years alone. A VAT at half the European level would generate $800 billion in new revenue. A VAT will become more and more important as technology improves because you cannot collect income tax from robots or software.
3. 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 $800 – 900 billion in new revenue from economic growth and activity.
4. Taxes on top earners and pollution. By removing the Social Security cap, implementing a financial transactions tax, and ending the favorable tax treatment for capital gains/carried interest, we can decrease financial speculation while also funding the Freedom Dividend. We can add to that a carbon fee that will be partially dedicated to funding the Freedom Dividend, making up the remaining balance required to cover the cost of this program.See more FAQs