The Universal Basic Income, in 10 Questions

The most common questions people ask about the policy endorsed by tech entrepreneur and Democratic candidate Andrew Yang.

1. Andrew Yang plans on sending out a check of $1000-a-month for every single American adult — wouldn’t that cost $3 trillion a year?

No. It’s much less than that. The government pays $1 trillion, which is significantly less than other plans proposed by leading Democrats in order to expand welfare. Of the remaining $2 trillion — $800 billion comes from VAT and $1.2 trillion is discounted because it overlaps with current government aid programs.

2. Why should the government apply a value added tax?

This is the most effective way to generate extra revenue for the government. And compared with other taxes, a VAT is relatively harder to dodge. In France, a wealth tax cost the country twice as much as it benefited because of tax evasion.

3. But shouldn’t the government target wealthy individuals? Doesn’t a VAT affect corporations?

If greed is the issue, the government should focus on tackling large corporations rather than wealthy individuals. Bezos is worth billions. Amazon is worth trillions — the corporation paid no federal income tax on more than $11 billion in profits last year and they still have billions more overseas or in corporate buybacks.

4. Why should taxes be increased in the first place?

Taxes aren’t about wealth redistribution. It’s about inequality. Americans have never seen this level of economic division between the rich and the poor, or even this level of low taxes. The corporations that benefited from this environment have spent more time enriching themselves than spending their wealth, paying workers and trickling profits down to the middle and working class. Corporate greed is the reason the US has had years of wage stagnation and high poverty rates.

5. So is the UBI the best way to combat inequality?

It‘s certainly the most direct and cost-effective way. Current welfare programs require increasing administrative costs. For every dollar spent on welfare, 30–50 cents goes into expanding government and hiring social workers. Americans can eliminate bureaucratic inefficiencies with a no-strings-attached check delivered to every citizen on a monthly basis.

6. …but what about pre-existing welfare programs?

You can opt in for either the UBI or pre-existing welfare benefits — opting for the latter is worse because you can lose all your benefits (such as medicaid and housing subsidies), after reaching a certain income threshold. The UBI on the other hand covers you regardless of circumstance.

7. But what about rich people? Why do they need $1000?

There’s no need to draw a line. If you don’t need $1000, just donate it to charity.

8. Why $1000? Why not $200 or $500?

$1000 a month keeps every American right above the poverty line.

9. Won’t people spend that money on alcohol or drugs?

Maybe. And so does the status quo of a government that provides housing assistance and medical coverage. But the real issue is that the majority of responsible Americans need some form of government assistance, but don’t want the government to allocate where that welfare capital should go into. People who live paycheck to paycheck and have good pre-existing medical coverage might find it better to use some assistance to cover a different expense or an investment — and that can only be resolved with direct cash.

10. Have we seen the UBI implemented in other places?

Yes. Finland, and the state of Alaska have tried implementing the UBI, to mixed results. There’s a lot of external reasons why the UBI doesn’t work out in the way it’s supposed to. In Finland, the UBI experiment failed because the way in which they tested it was flat-out stupid. Their whole sample size was unemployed, and people who became employed lost their universal basic income benefits. The experiment failed to see how the UBI affected employed groups, and also disincentivized unemployed people from finding jobs.

In the real world, it’s worth considering most people who are unemployed would not stop looking for a job simply because they’re getting paid $1000 a month.

The other issue with testing the UBI is that it’s extremely costly. There isn’t many developed countries that can run a large enough trial size. The largest experiment was in Alaska, with a population of less than a million. Despite its moderate success, the US won’t likely implement the UBI unless they see the idea become more mainstream.