Universal basic income globally of approximately $4000 per annum distributed by the United Nations

A universal basic income set at $5000 would cost $30 trillion (6 billion humans above infancy x $5000). This would provide both the leg up for individuals and provide a tax base for governments to develop national and local infrastructure.

How do you raise $30 trillion? Well a good place to go looking would be amongst those with some money. The Pareto distribution can help in this regard. In 1906 the Italian engineer and economist Vilfredo Pareto proposed via statistical analysis that 80% of a countries wealth is held by about 20% of the people. This departure from an egalitarian state where each fraction of a population x owns the same fraction of wealth y was expressed by him in the mathematical formula-
ln(y) = ln(A) + nln(x)
Here A is a constant. If one takes the exponent of this expression and demands that y=0 at x=0 and y=1 at x=1, there results the power law-
y = xn
One knows from calculus that its derivative is dy/dx=nxn-1and, hence, y satisfies the first order differential expression-
dy /dx  =  n / x  *  y  subject to y(1) = 1
If we plot this function for values of n=1, 2, 4 8, and 16, we get the wealth distribution curves shown-


In an ideal egalitarian state the curve corresponding to n=1 holds while in a totalitarian state where all power lies with just one person the n=∞ case applies. The curves in between refer to populations with different degrees of wealth distribution. In the United States the wealth breakdown is approximately given by the following table-
Percentile Fraction of the Population      Per cent of Wealth Held
Upper 1%      34.3%
95%-99%      24.6%
90%-95%      12.3%
80%-90%      13.4%
60%-80%      11.3%
40%-60%      3.8%
0%-40%      0.02%
This distribution is seen to be highly slanted toward the very wealthy and is in excess of the 20-80 rule described by Pareto which corresponds to n=8. The upper 1% of the US population is seen to control about 34% of the wealth and the upper 10% controls a total of 71% of the wealth as indicated by the red dots in the graph. This distribution is thus seen to be close to the Paretto Curve y=x16 with the very richest 1% requiring an even larger exponent of n=32.
A global wealth pyramid shows the data different way

If we plot the Pareto graph for the current unequal situation world- wide, we could set the area under the curve to estimate a tax take of $30 trillion. If the total global net assets are approximately $240 trillion we are looking to raise 12.5% for a Universal Basic Income fund. To raise that money we need to divide the top of the pyramid up into various segments of different tax rates. It is very important to remember that we are aiming to tax wealth not income here. It will remain up to sovereign governments to run their own tax policies on income.

Firstly the Ultra High Net Worth Individuals with wealth assets of greater than $30 million. There were over 200 000 such individuals in 2013.
     Net Assets each
$ million     No of individuals     Total Wealth $bn     Global Wealth Tax rate     Tax Take
$bn
     >1 billion     2170     6516     60%     3909
     550-999     1080     929     55%     511
     500-549     2660     1695     50%     847
     250-499     8695     3420     45%     1539
     200-249     14185     3205     40%     1282
     100-199     23835     3780     35%     1323
     50-99     60760     4720     30%     1416
     30-49     85850     3505     25%     876
Totals     approx.     200000     $27 tn          $11.7 tn
                         
(The World Ultra Wealth Report 2017, Exclusive UHNWI Analysis (5th Ed) June 27, 2017)

High Net Worth Individuals can be defined as having net assets between $1 million and $30 million. In 2016 there were 16.5 million such individuals worldwide, total net wealth $63.5 trillions. If the average tax take was set at 22% (actually varying within the range 5% - 24%) perhaps $14 trillion would be raised.  (“The proliferation of high-net-worth individuals” The Economist: Oct 4, 2017)

The third segment of the population of interest are the “mass affluent” – net assets $100000 to $1 million. There are roughly 600 million such individuals (the rest of the top 10% of the wealth pyramid) with total net assets of $101 trillion. Using a tax rate here of say 5%, the tax take would be approximately $5.4 trillion. (Wikipedia, 2018)

So we end up with a Global Progressive Wealth Tax Income in year one as shown:

$11.7 tn  +  $14.0 tn  +  £5.4 tn   =   $31.1 trillion

Obviously these are estimated figures and if redistributed as a Universal Basic Income, this money would at once reduce inequality to such an extent as to require the a different Pareto curve in year two with a lower ‘n’ value and a wider tax base  (perhaps the top 15% of the wealth pyramid).
However there are problems with a Global Progressive Wealth Tax precisely because it is trying to tax wealth. The issue of valuation is tricky. Determining a rich person’s precise net wealth is difficult, even for the wealthy themselves. Perhaps 60% of the wealth of the top 1% is “non-financial” – vehicles, boats, real estate and most difficult of all private businesses. Also as soon as the tax rate rises above the rate of return on capital (approximately about 4%), the wealthy can no longer pay the tax out of income interest on their capital. It starts to bite into their capital. This is the whole point of some redistribution. But just how do the wealthy liquidate assets to pay more tax. It may be possible to sell some stocks and shares to the pension funds, but after that how can valuable properties or businesses be sold if all other members of the wealthy classes are trying to do the same? Just who is going to buy? (Why Thomas Piketty's Global Wealth Tax Won't Work, Tim Worstall, Forbes, March 30, 2014).
So in the real world, it would be difficult to impose a wealth tax above 20% on any of the ultra high net worth individuals because of the issues of valuation and liquidity. This means that the total tax take in year one will probably be about half of the example above ($5 tn).  As a consequence the total tax take might only be $25 trillion, therefore allowing an annual universal basic income of $4100 approximately.


Globalisation is eroding the wages of the lower and middle classes and the robot revolution could remove middle class jobs altogether so never before has the time been so ripe for the introduction of a universal, unconditional basic income. The Land of Plenty is rich thanks to institutions, the knowledge and the social capital amassed for us by our forebears. This wealth belongs to us all. (Bergman, 2018).