0

If everyone in the US was given $1000 per month, paid for by a goods and services tax of 10%, would prices then skyrocket, making the extra money useless?

For example, if I wanted to buy products X, Y, Z in a given month, which each cost \$200, then \$1000 would obviously pay for that. But would merchants all raise their prices drastically higher, since they know everyone has free money and can afford the higher prices? Would this cause so much inflation that the extra $1000 would effectively become meaningless?

Edit: This question is unique from the possible duplicate, because it specifies an income amount, tax amount, and source of the tax which can be input into economic models to get a specific answer.

Giskard
  • 29,387
  • 11
  • 45
  • 76
Steve Burke
  • 1
  • 2
  • I’m not sure this is the best forum to start vetting candidates’ policies; it could easily deteriorate. It would have been better to phrase this as a question about a basic income policy. There are questions already about the basic income. – Brian Romanchuk Mar 22 '19 at 01:29
  • It depends where the money comes from, i.e. how the program is funded. If it's funded from existing taxes, by substituting other forms of welfare with UBI (as some [conservative proposals] do) then I'd expect minimal inflationary effect.

    At the other extreme, if the treasury just printed this UBI money, then of course that would have the usual effect of increasing inflation by increasing the monetary mass.

    And somewhere in the middle, if it were funded with new taxes... it depends what that would do to the economy as a whole.

     – the gods from engineering Mar 22 '19 at 03:35
  • @BrianRomanchuk This is not a political question. Usually on StackEx, people expect questions to be precise, not general. I only included the candidate so you would know exactly what the structure of economic proposal in question was. I searched the site and found no similar questions. Universal Basic Income is not even a tag. – Steve Burke Mar 22 '19 at 15:12
  • @Fizz I stated in the question that program is funded by a 10% good and services tax. You say in this case, "it depends what that would do to the economy as a whole". My question about inflation is essentially "what would [this exact proposal] most likely do to the economy as a whole" and the answer is "it depends on what it would do to the economy". I am very ignorant of economics theory (which is why I'm posting here). Does economic theory not answer questions about the economy as a whole? – Steve Burke Mar 22 '19 at 15:27
  • It doesn't. Ask separately if a VAT/GST increase (or introduction) causes or doesn't cause inflation. There's no clear answer to this. – the gods from engineering Mar 22 '19 at 15:52
  • Something that is less controversial is that indirect taxes (like VAT) increase inequality, so Young's scheme may be partially self-defeating if its goal is a decrease in inequality. However, UBI can have any number of other goals, like reducing bureaucracy/overhead (associated with means-tested programs). – the gods from engineering Mar 22 '19 at 15:58
  • @SteveBurke If someone asks about a SQL query, it rarely causes a political debate. This is not true in economics. Asking people to vet a policy platform is not going to be easily answered. – Brian Romanchuk Mar 23 '19 at 16:22
  • Wouldn't funding a 1,000 dollar monthly UBI with a 10% consumption tax only work if monthly average consumption was greater than 10,000 dollars? – Ask About Monica Mar 25 '19 at 18:59
  • @BrianRomanchuk I didn't ask anyone to vet a policy platform. I asked a specific economic question. I had mistakenly thought economics was a science. I'm not sure what kind of questions of you're supposed to ask on an economics forum, if you can't ask about economics. How will the common person choose leaders with good economic ideas if every single citizen is expected to spend years of study to get an economics degree so he can tell if a policy is economically sound or not? What is so controversial about asking an expert and having the answer for all to see? – Steve Burke Mar 26 '19 at 08:25
  • @SteveBurke This question has been marked as a duplicate. The other questions give examples of ways of phrasing the question in order to avoid the difficulty of trying to analyse all the ramifications of a particular policy proposal. – Brian Romanchuk Mar 26 '19 at 22:25
  • @BrianRomanchuk You're saying the specific questions are not valid if there is a more general question that is related. If I ask, 'Does Neptune have any moons?', you would say it's a duplicate of the question 'Do planets have moons?' where the answer is 'Some do any some don't.' I read the so-called duplicates and the answer is 'It depends on the specifics'. How does providing specifics make the question too difficult to analyze? The answer is either (1) Yes, (2), No, (3) Maybe, or (4) No economic models exist which can model VAT/GST UBI. – Steve Burke Mar 28 '19 at 07:13
  • Your tone explains why nobody will want to touch vetting a specific policy platform; people will argue if they get the wrong answer. Analysing the full effects of multiple policies would require a full economic simulation, which is out of scope for this website. – Brian Romanchuk Mar 28 '19 at 10:58
  • @BrianRomanchuk I don't know what tone you mean. The purpose of asking a question is to learn the answer. Why would I argue with the answer? Everyone on this forum is making accusations like the one you're making, with no evidence. All I did was ask an economics question and never received an answer. I don't understand why questions relating to politics are off-limits from logic, evidence, and reasoning. – Steve Burke May 15 '19 at 22:32

0 Answers0