Comment by dangus | Hacker News Reader

Comment by dangus | Hacker News Reader

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Andrew Yang is a nice guy but his "math" isn't actually all that good.

His plan to use a VAT to pay for UBI is a regressive tax. People with lower incomes spend a higher percentage of their income on consumable goods. Putting a higher VAT or sales tax on everything to UBI puts a lot of the burden on the lower class to pay for this program. Someone with a much higher income has a number of ways to avoid this tax - they can invest in companies instead, they can buy real estate, they can take a jet to a different country and buy expensive stuff there instead of buying it in the country with a high VAT, like how people in Massachusetts buy their computers in New Hampshire.

So, he "did the math," but that doesn't automatically make it good policy.

The concept of UBI is a good idea to explore in the future. However, we shouldn't just assume that it's definitely going to work as intended, either: https://www.helsinki.fi/en/news/nordic-welfare-news/heikki-h...

His plan was to exempt such goods from VAT, so it wouldn't be regressive.

That said, I wasn't entirely convinced by the Freedom Dividend and wish it hadn't been the centerpiece. What I was more interested in and really appreciated was his overall approach and focus on problems and solutions. An actual problem solver and uniter, not someone perpetuating the WWE reality TV show that is our politics.

What problems has Andrew Yang solved? My main concern with him is that he lacked any significant accomplishments for a presidential candidate.

Actually that's true, I wish I could take back my original comment at this point or modify it (too late).

"Assuming all goods are subject to a VAT and the entire VAT is passed on to consumers, an individual would have to buy $120,000 worth of items before the extra costs associated with a VAT “use up” their UBI."

That is...true, yes. Everyone's still getting the extra $1,000 a month.

Using all of that up by spending on a 10% VAT puts you at spending $120,000 a year.

So, while a VAT is not progressive, funneling it into UBI turns it into being progressive. That makes sense. You don't even need a goods exemption for that to work as intended.

I am also not convinced on the idea of UBI. There needs to be more studies including large scale studies if possible. I am not convinced that the largest rent-seekers with limited competition and supply alternatives wouldn't just suck those income gains away - jobs with labor supply surplus might pay closer to the minimum wage, landlords might simply all agree to raise rent, Comcast will raise bills across the country, colleges raise tuition, etc. UBI sometimes feels like an oversimplification, one of those "easy solutions" that doesn't take a long time to write down and fits in a campaign slogan.

a regressive tax used to fund a progressive policy can be either net regressive or net progressive. if rich people buy enough stuff that they pay more VAT than they receive in UBI, the whole system is still progressive.

And really, a VAT might be slightly regressive in practice because poor people tend to spend a larger fraction of their income but it's still pretty close to being a flat tax. If you were to try to fund a UBI with a head tax that would indeed be pointless. As long as rich people tend to spend large amount of money, in absolute terms, than poor people a VAT+UBI combo is going to be progressive.

For a good example of this, see Social Security (OASDI) in the US. The funding method is very regressive, taking a flat percentage of income only under a threshold (12.4% of income under $137,700 with half paid by employer and half paid by employee). People who make more than that pay less tax.

But then we use the tax to directly fund one of the most progressive programs in the US, which directly pays people who need it most.

I think most people would think of Social Security as a net progressive policy, even though it has a very regressive funding model.

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