Andrew Yang is running for President in 2020.  One issue in his platform is what he calls the Freedom Dividend.

Andrew Yang’s website describes the Freedom Dividend as follows:

Andrew would implement a Universal Basic Income, ‘the Freedom Dividend,’ of $1,000/month, $12,000 a year for every American adult over the age of 18. This is independent of one’s work status or any other factor. This would enable all Americans to pay their bills, educate themselves, start businesses, be more creative, stay healthy, relocate for work, spend time with their children, take care of loved ones, and have a real stake in the future.

Any change to the Freedom Dividend would require a constitutional amendment.

It will be illegal to lend or borrow against one’s Dividend.

A Universal Basic Income at this level would permanently grow the economy by 12.56 to 13.10 percent—or about $2.5 trillion by 2025—and it would increase the labor force by 4.5 to 4.7 million people.  Putting money into people’s hands and keeping it there would be a perpetual boost and support to job growth and the economy.

This proposal reminds me of 1972 Democratic presidential nominee George McGovern’s proposal to write a $1,000 check to every American. That sounded good to me, so I voted for George McGovern. I have learned a little since that time.

The obvious question is, “Where would the money come from?” Mr. Yang’s answer is that it would come from a value added tax that would add equity to the American tax system. Last year Amazon paid no federal tax on its $11 billion profit. A Value Added Tax (VAT) would change that. Other companies that paid no tax last year were Delta, Chevron, IBM, Netflix, General Motors, and John Deere. I am not criticizing those companies–they simply took advantage of the tax laws the way they are written. That is good business practice, and there is nothing illegal about it. However, there is a concept being omitted in this discussion–corporations don’t pay taxes–their customers do.

A value added tax levied on these companies would be passed on to the consumer in the form of higher prices for the goods or services involved. Every taxpayer might get his $1,000 Freedom Dividend, but it would be spent to cover the increases of the cost of the goods the VAT was levied on. Most countries do have VATs, but I am not sure adding any additional tax to American companies is a good idea. In the end, the consumer suffers and the cost of paperwork soars.