We Need VAT and UBI
14 hours ago
- #economic policy
- #automation
- #universal basic income
- The economy has a serious gap that needs fixing due to automation changing labor markets, making labor an inadequate measure of economic participation.
- VAT (Value-Added Tax) and UBI (Universal Basic Income) are proposed as a mechanical solution to address automation's impact, not as a political redistributive measure.
- Automation has automated basic necessity jobs, leading to new jobs that may be low-utility or unstable, requiring alternative economic signaling beyond labor.
- UBI is fair because it provides money for existing, encourages participation without reducing work incentives, and is simple to administer.
- VAT funds UBI in a circular way by taxing consumption, with price increases affecting different income groups variably, but redistribution is not the primary goal.
- The system adjusts for changing job nature, as physical and cognitive labor face automation risks, and the economy creates jobs chasing marginal utility.
- Few people will stop working due to UBI because VAT increases offset benefits for many, and most prefer to stay active; it may even enable skill development.
- Massive inflation is unlikely as VAT absorbs most UBI, though prices rise, and implementation should be gradual over years to stabilize the economy.
- Implementation suggests central bank management, with VAT and UBI increased monthly over years, funded by previous month's VAT to avoid debt.
- VAT is preferred over other taxes for funding UBI because it's apolitical, easy to measure, and minimizes market distortions in the transition to automation.
- Potential issues include procyclical effects in recessions, labor cost shifts affecting unskilled jobs, and Baumol's cost disease in public sectors.
- The system aims to solve economic stagnation, political polarization, urbanization pressures, and rebalance consumption's role in the economy.