It’s election season all around. The United States is gearing up for what promises to be yet another intense presidential election in 2020. Right now, several candidates are vying to be the Democratic party’s presidential nominee to take on President Trump in 2020.
Front runners include former Vice President Joe Biden, Senator Bernie Sanders, Senator Elizabeth Warren, South Bend Mayor Pete Buttigieg, and former Mayor of New York Michael Bloomberg.
But another candidate who is rarely talked about in the media is 44-year old businessman Andrew Yang, currently polling at just 3%, placing him at 6th place and just 1% behind Bloomberg.
The Freedom Dividend
Yang is noteworthy for his strong push to introduce universal basic income (UBI) in America, which his campaign calls the “Freedom Dividend”. The concept of a universal basic income has been kicking around for the past 100 years or so, picking up steam during the industrial revolution. So it’s not exactly a novel idea. However, it is a concept that many are wary of.
In the 1960s, Martin Luther King Jr and over 1,000 economists from over 125 universities signed a letter to then-President Nixon to request income guarantees. While the idea was passed by the US House of Representatives in 1970 under Nixon, it couldn’t get past the Senate as democrats wanted a higher income guarantee.
Today, though, the concept of UBI has gained support from the likes of Mark Zuckerberg, Robert Reich, Elon Musk, Richard Branson, Noam Chomsky, and more. And Andrew Yang hopes to bring this idea into fruition if he makes it into the White House.
Yang – who says he’s a problem solver, not a politician – talks about how automation has taken away 4 million manufacturing jobs, adding that the same is about to happen to millions of jobs in other sectors from automotive to retail.
How to pay for it?
To help address this issue, Yang proposes a Freedom Dividend of US$1,000 a month for every American adult starting at age 18, no strings attached. To pay for it, he plans to introduce a Value Added Tax (VAT), especially for goods and services offered by major tech companies like Amazon, Google, and Facebook.
Currently, huge companies like Amazon pay very little in the way of federal income tax. For example in 2018, Amazon paid nothing in U.S. federal income tax on the more than US$11 billion it made in profits before taxes. The company also received a hefty US$129 million tax rebate from the federal government. Effectively, the rebate meant that the company paid -1.2% in income tax. And Amazon isn’t the only one. In 2018, the tax breaks resulted in Netflix paying -2.5% on US$899 million in income and IBM paying -68.4% on US$500 million in income.
The VAT that Yang is proposing is a model that is currently being used by 160 countries. “It is a more efficient way of generating revenue with no loopholes” according to Yang’s website. He explained that a VAT will make it impossible for companies like Amazon to benefit from the American people without paying their fair share.
Yang explains that the reason VAT is so popular around the world is because it is difficult to dodge and easy to implement.
“By taking a slice at each point that value switches hands in the supply chain, big corporations will pay into the system to bring their products to market. If you want to do business in America, you have to pay into America,” said the website.
Singapore’s version of the VAT is the Goods and Services Tax (GST) which is levied on the import of goods and on nearly all supplies of goods and services in Singapore. Starting January, GST will also be levied on imported services like Netflix, Spotify, Apple, and Amazon.
The tax will also be levied on downloadable digital content from apps to e-books, software, and hosting and data management services. In some cases, even electronic marketplaces may be considered as suppliers of digital services made by overseas vendors.
On top of the VAT, Yang also says that introducing a Freedom Dividend will also save the government a lot in terms of incarceration and homelessness services because people will be healthier and stronger, meaning that “the Freedom Dividend would pay for itself” by helping people avoid American institutions which only shoots up overall federal costs.
Yang also intends to pay for the Freedom Dividend by taxing top earners and pollution. He plans to introduce a carbon fee that will be partially dedicated to funding the Freedom Dividend.
Will it work?
Yang also asserts that putting money into the hands of consumers will grow the American economy. The Roosevelt Institute projected that the economy will grow by approximately US$2.5 trillion and create 4.6 million new jobs with UBI. That would generate approximately US$800 to 900 billion in new revenue from economic growth.
On his website Yang2020.com, Yang cites over 461 research papers that have been published on the topic of UBI since 1998. These experiments of unconditional cash benefits from around the world have proven to be one of the most successful ways of reducing poverty, he says.
He notes that the World Bank has disproven the fears that recipients of UBI would waste the money on drugs or alcohol, stop working, or have more kids. Instead, these behaviours are reduced with UBI.
One concern that many have voiced over UBI is that they think it is a form of socialism. Yang dispels this, noting that it is simply capitalism where the income doesn’t start at US$0. He argues that markets and business function much better when people have money to spend and can participate in the market. The Freedom Dividend is pro-growth, pro-market, and pro-consumer, ‘the next form of capitalism’ which will account for the fact that technology is absorbing more and more work.
Yang emphasises that UBI encourages people to find work that suits them and will not be forced by financial stress to stay in a job that is underpaying them. He says UBI will increase workers’ bargaining power, increase entrepreneurship, improve mental and physical health, increase art production and nonprofit work, improve labour efficiency, and help people make smarter decisions.