Freedom Dividend Cost Analysis
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Cost Analysis of Andrew Yang's Freedom Dividend
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Last Updated: November 13, 2019
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Version: 1.5.16
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* Not officially endorsed by Andrew Yang.NOTICE: As we prepare to publish this to freedom-dividend.com, comments will be disabled on original spreadsheet starting August 10 11:59PM ET. Feedback can be left at website or tweeted @fdmath.
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** Model based primarily on 2017 statistics due to availability of public data as of original writing, July 2019.
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Line ItemValueNotesSource
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Annual Base Price of Freedom Dividend
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U.S. adult population252,070,495Only 18+ year olds are eligible for FD.https://factfinder.census.gov/faces/tableservices/jsf/pages/productview.xhtml?pid=ACS_10_1YR_S0101&prodType=table
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incarcerated ineligible1,449,405An estimated 575 per 100,000 18+ adults are incarcerated. Prisoners do not receive FD <a href="https://youtu.be/cTsEzmFamZ8?t=655" target="_blank" rel="noreferrer">per Yang</a>.https://www.bjs.gov/content/pub/pdf/p17_sum.pdf
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U.S. non-citizens ineligible17,644,9357% U.S. are non-citizens and ineligible for FD.https://www.kff.org/other/state-indicator/distribution-by-citizenship-status/?currentTimeframe=0&sortModel=%7B%22colId%22:%22Location%22,%22sort%22:%22asc%22%7D
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eligible population232,976,155Product of figures above.
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Freedom Dividend per capita$12,000.00Yang has said the Freedom Dividend will be <a href="https://youtu.be/P1BACZXyP64?t=2146" target="_blank" rel="noreferrer">tied to the US poverty line</a> ($12,490/yr income for a single adult as of 2019).https://www.yang2020.com/blog/ubi_faqs/even-universal-basic-income-ubi/
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FD base price$2,795,713,860,045.00Eligible population * $12K.
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GDP Growth from Consumer Spending Increase
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GDP increase if fully deficit-funded13.10%Based on projections from Roosevelt Institute study. This projection assumes UBI is 100% funded through government deficit spending.https://rooseveltinstitute.org/wp-content/uploads/2017/08/Modeling-the-Macroeconomic-Effects-of-a-Universal-Basic-Income.pdf
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GDP increase if fully tax-funded2.62%Based on projections from Roosevelt Institute study. This projection assumes UBI is 100% funded through taxes.https://rooseveltinstitute.org/wp-content/uploads/2017/08/Modeling-the-Macroeconomic-Effects-of-a-Universal-Basic-Income.pdf
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FD % funded from new taxes49.45%Yang's plan is neither fully deficit-funded nor fully tax-funded. New proposed taxes / FD cost = (VAT + SS cap removal + carbon dividend + fin. tx fee + capital gain/carried interest tax)/FD cost = % tax-funded. See other sections on breakdown of each new tax proposed by Yang.
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discount factor from fully deficit-funded5.18%Linear interpolation of ~49% between tax-funded & deficit-funded.
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effective GDP increase under FD7.92%Fully deficit-funded projection minus interpolated discount factor.
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2017 GDP$19,485,400,000,000.00https://www.google.com/search?q=2017+gdp
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GDP growth from increased consumer spending power$1,542,705,333,919.48Product of GDP * effective GDP increase under FD. This amount is derived from analysis of aforementioned Roosevelt Institute study projecting higher GDP due mostly to putting money into the hands of lower income households who have a higher marginal propensity to consume.
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GDP Growth from Smarter PopulationYang has noted economic stress lowers IQ, but we have not heard him mention higher IQ's effect on overall GDP. This is our own finding of a side effect of his plan.
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IQ point boost of “poor” when freed from economic stress
13"In a 2013 study published in Science, researchers from the University of Warwick, Harvard, Princeton, and the University of British Columbia find that for poor individuals, working through a difficult financial problem produces a cognitive strain that’s equivalent to a 13-point deficit in IQ or a full night’s sleep lost. Similar cognitive deficits were observed in people who were under real-life financial stress." -- Chicago Booth Review. Yang has cited this finding during multiple interviews including <a href="https://youtu.be/cTsEzmFamZ8?t=2334" rel="noreferrer" target="_blank">this one</a>. Assume then that economically de-stressing the impoverished raises IQ by same amount. https://review.chicagobooth.edu/behavioral-science/2018/article/how-poverty-changes-your-mind-set
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% U.S. categorized as “poor” in 2013 Science study69.00%"We computed effective income by dividing household income by the square root of household size and defined “rich” and “poor” through a median split on this variable." See <a href="https://docs.google.com/spreadsheets/d/1obvYTGmhNgtTO0VmNeOm9tYNBsqD13b4TpVdc24b8x4/edit?ts=5d3f46a6#gid=2135154711" rel="noreferrer" target="_blank">effective household income sheet</a> for extrapolation to entire U.S. population.https://science.sciencemag.org/content/341/6149/976
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GDP growth per IQ point boost$229.00"The researchers collected information on 90 countries... They found that intelligence made a difference in gross domestic product. For each one-point increase in a country’s average IQ, the per capita GDP was $229 higher." Note that while this Psychological Science article likely illustrates correlation, aforementioned Science study demonstrates that economic stress on lowered IQ is causal. Note also that article was published in 2011, and not inflation-adjusted for 2017. A 2017 figure is likely higher.https://www.psychologicalscience.org/news/releases/are-the-wealthiest-countries-the-smartest-countries.html
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GDP growth from smarter population$517,785,565,894.35U.S. adult population * FD-induced IQ point boost * % population affected * GDP growth per IQ point boost
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Total Added Tax Revenue from FD-powered GDP Growth
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total GDP growth from FD$2,060,490,899,813.83GDP growth from increased consumption + GDP growth from smarter population. Note that to be conservative, we did NOT multiply % GDP growth from increased consumer spending to a higher-IQ-induced larger GDP. That would have resulted in a higher total figure here.
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tax receipts as % of GDP27.10%https://www.oecd.org/tax/tax-policy/revenue-statistics-highlights-brochure.pdf
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additional tax revenue$558,393,033,849.55total GDP growth from FD * tax receipts as % of GDP
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New Value-Added Tax (VAT) Revenue
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FD-boosted GDP$21,636,062,085,894.302017 GDP + total GDP growth from FD on <a href="https://freedom-dividend.com/growth" target="_blank" rel="noreferrer">Growth page</a>.
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Consumer staples (food & personal products) exempt$1,060,167,042,208.8270% GDP is consumer spending and 7% (($4,049 on food at home + $707 on personal care) / ($74,664 - $6,863)) of consumer spending is on staples which will be VAT-exempt. The product with GDP is estimated consumer dollars spent on VAT-exempt purchases.https://www.usatoday.com/story/money/personalfinance/budget-and-spending/2018/05/08/how-does-average-american-spend-paycheck/34378157/
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VAT receipts as % of GDP4.8%EU countries on average collect 9.7% GDP in VAT. Yang has been quoted as saying proposed VAT rate will be half that of European levels. Assume this also means our VAT receipts as % of GDP is half of EU countries. 9.7% / 2 = 4.8%. See <a href="https://docs.google.com/spreadsheets/d/1obvYTGmhNgtTO0VmNeOm9tYNBsqD13b4TpVdc24b8x4/edit?ts=5d3f46a6#gid=960393941" target="_blank" rel="noreferrer">VAT % GDP sheet</a> for further analysis.https://www.oecd.org/tax/tax-policy/revenue-statistics-highlights-brochure.pdf
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additional VAT revenue from non-staples$987,642,962,096.90Product of figures above.
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Tax Revenue from Pushed-Up IncomeFD itself is not taxed, but may push income up into higher tax bracket.
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% Americans in lowest tax bracket26.70%Yang has said on multiple occasions that FD itself is not taxed, but may <a href="https://www.conwaydailysun.com/news/local/yang-says-free-money-will-cure-u-s-economy/article_49359f90-4c0b-11e9-a079-17b799fb6fd1.html" rel="noreferrer" target="_blank">push income up into higher tax bracket</a>. Assume those in lowest income tax bracket will not be pushed up and therefore not pay more in income taxes from FD push-up. See <a href="https://docs.google.com/spreadsheets/d/1obvYTGmhNgtTO0VmNeOm9tYNBsqD13b4TpVdc24b8x4/edit?ts=5d3f46a6#gid=316841260" target="_blank" rel="noreferrer">tax bracket sheet</a> for analysis.https://taxfoundation.org/how-many-taxpayers-fall-each-income-tax-bracket/
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% Americans w/ FD-pushed up income73.30%% Americans not in lowest tax bracket.
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average individual tax rate10.1%https://www.taxpolicycenter.org/statistics/historical-average-federal-tax-rates-all-households
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additonal push-up income tax revenue$206,975,084,200.71Product of average individual tax rate * % Americans w/ FD-pushed up income.
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New Revenue from Cap Removal on Social Security Payroll Tax
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revenue from social security tax on higher earners$120,000,000,000.00Cited in policy as one of the ways to pay for FD at <a href="https://www.yang2020.com/blog/ubi_faqs/pay-universal-basic-income/" target="_blank" rel="noreferrer">https://www.yang2020.com/blog/ubi_faqs/pay-universal-basic-income/</a>.https://www.cbo.gov/budget-options/2018/54806
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New Carbon Tax & Dividend
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final tax per ton$100.00Since our model is a "steady state" model where projected effects have been realized, we will use <a href="https://www.cnn.com/politics/live-news/climate-crisis-town-hall-august-2019/h_fff6ec76001e6c38e7b8354afc6b0846" target="_blank" rel="noreferrer">Yang's final tax of $100/ton</a> and not the starting tax of $40/ton.https://www.yang2020.com/policies/carbon-fee-dividend/
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tons produced per year by U.S.5,140,000,000https://en.wikipedia.org/wiki/Greenhouse_gas_emissions_by_the_United_States
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% carbon reduction at $100/ton32%"Their analysis indicates that starting with a $50 per ton carbon tax and increasing it by 5 percent per year would lead to a 63 percent reduction in total U.S. greenhouse gas emissions by 2050." Starting at $50 per ton and at 5% annual increase, it will take approximately 15 years to reach Yang's proposed final tax of $100 per ton. For simplicity's sake, let us also assume carbon reduction as a function of carbon tax is linear. MIT study statement was made in 2018, so approximate a 30 year timeline in the study to 2050. 15 years is halfway between 30 years, so let us conclude half of the estimated 63% carbon reduction will be achieved after 15 years.http://news.mit.edu/2018/carbon-taxes-could-make-significant-dent-climate-change-0406
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projected tons produced per year by U.S. at $100/ton tax
3,520,900,000
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% going towards FD50%https://www.yang2020.com/policies/carbon-fee-dividend/
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revenue from carbon dividend$176,045,000,000.00Product of final tax, reduced carbon emissions and % tax going towards FD.
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New Financial Transaction Tax
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revenue from financial tx tax$50,000,000,000.00Proposed to limit financial speculation and raise revenue on <a href="https://www.yang2020.com/policies/financial-transaction-tax/" target="_blank" rel="noreferrer">official site</a>.https://www.taxpolicycenter.org/sites/default/files/publication/99391/2000287-financial-transaction-taxes-in-theory-and-practice.pdf
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Capital Gain/Carried Interest Tax
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revenue from closing favorable tax treatment on carried interest
$18,000,000,000.00Per <a href="https://www.yang2020.com/policies/capital-gain-carried-interest-tax/" target="_blank">Yang policy proposal</a>, investment fund partners to pay income level tax on carried interest versus current lower capital gain rate.https://www.nytimes.com/2015/06/06/business/dealbook/how-a-carried-interest-tax-could-raise-180-billion.html
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revenue from mitigating favorable tax treatment on capital gains
$30,900,000,000.00Per <a href="https://www.yang2020.com/policies/capital-gain-carried-interest-tax/" target="_blank">policy proposal</a>, Yang suggests ending lower (15-20%) capital gains tax rate. It is not entirely clear if Yang proposes all gains to be taxed at income tax rates. We chose to adopt Tax Policy Center's Option 15 (p.27) to "Replace lower rates on long-term capital gains and qualified dividends with an exclusion of 40 percent" for our calculations. Their Dynamic 10-year revenue forecast estimates $309B over 10 years, of which we took the annual average.https://files.taxfoundation.org/20170130145208/TF_Options_for_Reforming_Americas_Tax_Code.pdf
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total revenue from Captial Gain/Carried Interest Tax proposal
$48,900,000,000.00Sum of preceding 2 figures.
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Overlap with Welfare
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Americans on welfare program(s) affected by FD32,012,953"27.1 percent, benefited from at least one means-tested poverty program. The biggest benefits here were Medicaid (19.5 percent), food stamps (12.7 percent)...". Medicaid is untouched by FD, so assume food stamp percentage (12.7%) is representative of number of participants in one or more programs offset by FD.

Only programs that are means-tested and NOT contributions-based overlap with FD per <a href="https://medium.com/basic-income/there-is-no-policy-proposal-more-progressive-than-andrew-yangs-freedom-dividend-72d3850a6245" target="_blank" rel="noreferrer">Medium article</a> .
https://www.washingtonpost.com/news/wonk/wp/2012/09/18/who-receives-benefits-from-the-federal-government-in-six-charts/
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median max potential welfare amount$28,872.00Median state figure from Table 14 of Cato report.https://object.cato.org/sites/cato.org/files/pubs/pdf/the_work_versus_welfare_trade-off_2013_wp.pdf
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% welfare spending affected by FD21.6%Roughly $155B (SSI, TANF, WIC, SNAP, et. al.) of $717B, or 22%, of welfare spending affected by FD. At the time of this writing, it is not clear if EITC is affected by FD, so it is NOT included.https://en.wikipedia.org/wiki/Social_programs_in_the_United_States
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% max amount typically realized75%Recipients do not typically receive 100% of the potential benefits available as calculated by Cato report. Assume only 75% typically realized.
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typical welfare recipient amount affected by FD$4,681.13Product of preceding 3 figures.
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% opt-in FD95%Given that typical welfare recipient will receive 2-3x the benefit amount with FD, assume 95% will opt-in to FD.
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welfare savings from FD opt-in$142,363,945,435.32Product of welfare recipients opting in to FD and typical recipient amount.
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% opt-out FD5%100% - estimated % of those opting in to FD.
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FD reduction from opt-outs$19,207,771,719.00People that stay on FD-affected welfare programs will not receive FD and are subtracted from initial pool of FD recipients.
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cost reduction from welfare overlap$161,571,717,154Sum of welfare savings from FD opt-in plus FD reduction from those staying on affected programs and opting out.
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Savings from Bureaucratic DownsizingAY plan to downsize federal workforce
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federal worker wages and benefits$279,000,000,000.00https://www.downsizinggovernment.org/federal-worker-pay
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% downsize federal workforce bureaucracy17.50%Middle of 15 - 20% target range from policy proposal.https://www.yang2020.com/policies/downsizing-federal-workforce/
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cost reduction from federal government downsizing$48,825,000,000.00Product of figures above.
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Reduced other Expenses from FD
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total healthcare spending$3,500,000,000,000.00https://www.cms.gov/Research-Statistics-Data-and-Systems/Statistics-Trends-and-Reports/NationalHealthExpendData/downloads/highlights.pdf
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% spending from federal sources37.0%https://www.cms.gov/Research-Statistics-Data-and-Systems/Statistics-Trends-and-Reports/NationalHealthExpendData/downloads/highlights.pdf
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reduction in healthcare spending8.5%Based on Ontario's Mincome experiment.https://www.jstor.org/stable/23050182?seq=1#page_scan_tab_contents
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Savings from Reduced Healthcare Spending$110,075,000,000.00Product of figures above.
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# homeless in US554,000https://en.wikipedia.org/wiki/Homelessness_in_the_United_States
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average annual cost per homeless$35,578.00https://endhomelessness.org/resource/ending-chronic-homelessness-saves-taxpayers-money-2/
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homelessness % reduction30%Estimated as a function of FD annual amount to cost per homeless.
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Savings from Homelessness Decrease$5,913,063,600.00Product of figures above.
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FD reduction in property crime30%Demonstrable decrease in property crime in study of Alaska Permanent Fund Dividend, but UBI amount was much smaller and difficult to extrapolate to a much larger basic income of $12k/year proposed by FD. Assume 30% reduction.https://promarket.org/basic-income-ubi-reduce-crime
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property crime as % of all federal crime4.90%https://www.bop.gov/about/statistics/statistics_inmate_offenses.jsp
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cost of crime federal/state/local$280,000,000,000.00https://www.gao.gov/assets/690/687353.pdf
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federal portion of cost of crime9%Estimated portion of pie chart found at prisonpolicy.org.https://www.prisonpolicy.org/reports/pie.html
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Savings from Property Crime Reduction$370,440,000.00Product of figures above.
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Federal Revenue from 5-10% High School Dropout Reduction
$504,000,000.00Totaled each state's projected federal revenue increase analyzed at all4ed.org. See <a href="https://docs.google.com/spreadsheets/d/1obvYTGmhNgtTO0VmNeOm9tYNBsqD13b4TpVdc24b8x4/edit?ts=5d3f46a6#gid=2075020112" target="_blank" rel="noreferrer">h.s. dropout reduction sheet</a> for further analysis.http://impact.all4ed.org/
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total of other miscellaneous reduced expenses from FD
$116,862,503,600.00
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