Numbers are important but concepts even more so

One of the trailing - but imminently to break through! - Democratic runners over in the US is Andrew Yang. He’s arguing in favour of a universal basic income over there. Our own views on such differ among us with at least one of us simply arguing that it would be better than the current disincentives of the extant welfare state.

Yang’s shtick is that he can do math and that this is important. Which, of course, it is. But getting underlying concepts right before doing the sums also matter, which is where there’s a bit of a failure.

A Value-Added Tax (VAT) is a tax on the production of goods or services a business produces. It is a fair tax and it makes it much harder for large corporations, who are experts at hiding profits and income, to avoid paying their fair share. A VAT is nothing new. 160 out of 193 countries in the world already have a Value-Added Tax or something similar, including all of Europe which has an average VAT of 20 percent.

It’s true that the great difference between the US Federal tax system and those across Europe is the absence of a VAT. Also that anyone desirous of increasing the size of that Fed stuff to European levels will have to have a VAT or equivalent. It’s not possible to tax the rich enough to pay for such an expansion.

And yet, VAT is not a tax upon production. Sure, it’s producers who collect it but that’s not where the incidence is at all. As every economic textbook will tell you it’s a consumption tax. The people actually paying it are consumers. Us that is.

It might well be true that a UBI is the way to go and the numbers don’t look all that off. But concepts matter too - it’ll be US consumers paying the VAT to fund the UBI. Best to tell them that, eh?