Among Democratic candidates for the U.S. presidency, entrepreneur Andrew Yang has garnered the most grassroots interest. To use his words, Yang is the Asian guy that wants to give everybody a thousand dollars a month. For those who have carefully analyzed his plans for universal basic income, or UBI, his plan has undeniable appeal.
It’s not just about the “free money,” although it certainly doesn’t hurt the cause. Instead, it’s the reasoning behind the UBI initiative. As Yang likes to tout throughout his campaign trail, the U.S. is facing the biggest economic transition in history. And this transition has an identifiable catalyst (or culprit, depending on your perspective): automation.
Due to raging advances in artificial intelligence and machine learning, it’s not inconceivable that robots will replace many jobs. In fact, tech firms like Amazon have already displaced many traditional occupations with automated machinery. Therefore, UBI isn’t necessarily free money; instead, it’s an effort to mitigate the impact of the coming economic revolution.
Of course, conservatives refuse to see UBI in any other lens besides “welfare for all.” From their perspective, such a program would rob people of the incentive to work. However, they conveniently forget that it’s next to impossible to live off of $12,000 a year.
Another point they ignore is our current, antiquated system disincentivizes work. Yang is merely suggesting a better alternative. Let me explain:
Trump’s Tax Code Change Bolsters UBI
Last year, President Trump caused quite an uproar when his proposed tax code change went into effect. Most notably, several employees thought that they were getting a bigger tax refund. Instead, many either got a small refund or were left owing money to the government.
That’s a whole other bag of BS that I’ll address for another day. But for this article – and as it relates to UBI – I’ll focus on another contentious point: the doubling of the standard deduction.
Prior to the tax code change, tax payers that itemized their deductions could enjoy allowable deductions that exceeded the standard deduction. And since the threshold for the original standard deduction was so low, an incentive existed to ramp up charitable giving.
But with the standard deduction doubling, that incentive really goes away for many middle-class taxpayers. After all, not too many folks spend over $10,000 in charitable giving. Even if they did, proving such a high amount is another matter altogether.
Imagine, though, if charitable tax deductions were accretive on top of the standard deduction. At that point, you’d have a particularly heightened incentive to give.
And that’s the principle behind Andrew Yang’s UBI initiative: no matter how much you make, you’ll always get the $1,000 per month. That contrasts sharply with the current system. For instance, if you’re on welfare, making too much money will automatically remove you from the social net. Therefore, those on welfare will stay on it.
Yang’s UBI proposal is a remarkably groundbreaking step forward. It’s too bad that old political schools of thought cloud the narrative.