Andrew Yang wants to run for president promising free cash handouts

Yang says he is uniquely positioned to see both sides of the automation story in the United States thanks to his work with Venture for America.

“I’m usually highly exposed, where most people in my line of work have not spent six years marching around Michigan, Ohio, Pennsylvania, like Missouri,” Yang tells CNBC Make It. “Most people haven’t spent six and a half years working in these regions with the businesses and entrepreneurs there. And most people probably do not directly know people in Silicon Valley who are working on automating away millions of jobs and know it.”

Paying for UBI

Under Yang’s plan, the UBI payment would be funded by a “new tax on the companies that are benefiting most from automation,” he says in a video on his campaign’s website.

That tax, he explains, would be a value-added tax (VAT) of 10 percent on goods and services a company produces. (Europe already has a VAT, with rates ranging from 17 percent in Luxembourg to 27 percent in Hungary as of Jan.1, 2018, according to the European Commission.)

The idea of a VAT will become ever more important, according to Yang’s campaign, “because you cannot collect income tax from robots or software.”

“Because our economy is so vast, this would generate between $700 and $800 billion in revenue,” said Yang on Reddit.

Yang points to a 2012 estimate published by Bloomberg that a 10 percent VAT would raise $750 billion. And a 2010 estimate by Eric Toder and Joseph Rosenberg of the Washington, DC-based Tax Policy Center, predicted the United States could have raised $356 billion in 2012 through a 5 percent VAT. At the time, that $356 billion in VAT was equal to 2.3 percent of GDP. Yang doubled the VAT in this estimate for a 10 percent tax, which equals $712 billion.

Eric Toder tells CNBC Make It a 10 percent VAT in the United States could raise anywhere from $500 billion to $1 trillion, depending on how broadly the tax is applied.

“I made a rough calculation that a 10 percent VAT with the same coverage as the average in other countries would raise about $500 billion per year,” says Toder. A typical VAT is levied on 50 percent of total spending on consumption in a country, according to Toder (who references “The VAT Reader: What a Federal Consumption Tax Would Mean for America” published in 2011).

Under Yang’s plan, current welfare and social program beneficiaries in the United States would be able to keep their existing benefits if they prefer.

As for getting a VAT passed, Yang says, “If I become president then there will likely will have been a blue wave, and so we would have a majority Democratic Congress.” But he also sees evidence that Republicans can support a cash handout to the North: “The only state right now with a universal basic income equivalent is Alaska and that’s a deep red state.”

Indeed, Alaska has a state-wide version of UBI, and has since 1982, when the state distributed the Alaska Permanent Fund check. The goal was to share the oil riches with future generations. Today, Alaskan residents still get cash handouts from the fund, called the Permanent Fund Dividend. When Zuckerberg visited Alaska in the summer of 2017 as part of his “Year of Travel challenge,” the Facebook executive observed the state’s cash handout program “provides some good lessons for the rest of the country.”

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