The Real Importance of Milton Friedman's Negative Income Tax

Many years ago, as a freshman in college, I read about Milton Friedman's 'negative income tax' idea in Paul Samuelson's fundamental Economics text.


At the time, I thought it was simply another way to transfer benefits to the poor.


With time and my own maturity, I have come to more fully realize how transformationally different Friedman's notion was from all the transfer payment plans enacted by the US Congress.


Specifically, true to his libertarian views, Friedman envisioned providing benefits to poorer Americans as simply providing them the means to live their lives, not a series of administered programs with extensive, confusing rules on how to meet various needs in their lives.

For example, how different would US health care for the poor and elderly be, were we to have enacted a Friedmanian negative income tax solution, than it currently is for Medicare and Medicaid?

Instead of two grossly expensive, administered, complex programs prone to waste and fraud, we would simply have provided low-income tax return filers below a specified minimum AGI with vouchers to buy needed health insurance. Period.

That's it. After that, those people simply enter the health care system like anyone else. If they had some special condition that mitigated their finding an affordable policy, a government-provided policy could be issued. And, again, with no extra people, overhead or rules, those citizens would have health insurance and access to health care.

Why didn't Congress do this, instead of enacting a look-alike to our failed, unaffordable Social Security System?

Friedman's genius on this matter was to see a nation in which the poor were given the means to access affordable necessities, such as food and medical care, without dictating how they were to do it.

It was all about personal liberty and freedom, even while being aided by fellow citizens through the tax code.

Instead, we now have a myriad of transfer payment programs which frustrate and confound those they ostensibly were to assist. While driving government costs higher by creating whole armies of administrators to preside over the operation of needless programs.

Friedman will be missed in more ways than just on topics of conventional economics.

On the subject of assisting the poor, and doing it simply, efficiently and with maximum liberty, through the tax code, he was unsurpassed.