According to Robert Greenstein, the president of the Center on Budget and Policy Priorities(CBPP), “There are over 300 million Americans today. Suppose UBI provided everyone with $10,000 a year. That would cost more than $3 trillion a year”

Here is what it is wrong: Suppose for a second that in the USA everyone had the same salary, and taxation was a percentage of income, then logic tells us that the cost of implementing an UBI would be zero, since everyone would pay $10,000 in taxes and receive $10,000 back. But the previous math shows that it would cost 3 trillions, and that makes no sense.

We have to start thinking more about cash-flow and less about value involved. So if a hypothetical country with 2 people, with salaries of $50, and $100 has an UBI and a tax of 10% of income, then the first pays $5 and receives $7.5, and the second plays $10 and receives $7.5. Then this country UBI would have a cash flow of $2.5 , instead of “a cost of $7.5*2 = $15”.

So, the cost of a basic income can only make sense if you also take into account the tax system. After choosing the tax system, we can calculate the amount of cash-flow that the policy generates, that is a better estimate of the concept of “cost” of a basic income.

Let’s propose a simple UBI, financed by a flat tax of x% over every citizen’s income. The amount of cash-flow that such policies would generate is dependent on the inequality of the country. On a perfectly equal society every one should pay the same amount and receive it back in the form of UBI, so the cost is minimum(zero). On a perfectly unequal country just one citizen will finance all of it’s country UBI, so the cash-flow will be maximum(the fraction that this person will get back from his taxes is negligible: 1/#(number of citizens)).

Still thinking about a flat tax, how much would such a system cost at each country?

Here are some estimates I made, thinking of 100% as the conventional grant*(#citizens) formula:

So, in low inequality countries like Switzerland, 80% of the amount paid in taxes would go back to taxpayers, and only about 20% of that total value would change hands. Using this estimate, a basic income of $10,000 per citizen on the US would “cost”, financed with a flat tax on income, about .2916*3 Trillions= $874 Billions.

To do the calculations I used the latest deciles information of each country from the World Income Inequality Database(WIID). Using deciles is not perfect, since the calculation does not include cash-flow intra-deciles, but still is a better estimate of how much money changes hands.

Line of code I used to calculate the cash-flow amount given a vector v(in percents) of deciles:

percentage = sum([abs(d-10) for d in v])/2

Source of income data.