Milton Friedman proposed to give everybody free money in his book “Capitalism and Freedom”. He mostly referred to this plan as a negative income tax (and he also referred to it as a guaranteed income because that’s exactly what it is.) But why would Milton Friedman, an outspoken free market capitalist, support giving people money for nothing? Here are 5 reasons backed by Friedman’s own words.
1. To Reduce Government Bureaucracy
A single guaranteed income program could replace the current government maze and mess of 126 separate anti-poverty programs.
We should replace the ragbag of specific welfare programs with a single comprehensive program of income supplements in cash — a negative income tax. It would provide an assured minimum to all persons in need, regardless of the reasons for their need…A negative income tax provides comprehensive reform which would do more efficiently and humanely what our present welfare system does so inefficiently and inhumanely.
2. The Efficiency of Free Markets
Markets allow people to vote with their dollars. Businesses must compete for these dollars/votes by offering a better price or higher quality product. That goes for food, housing, nearly anything. But in order for this voting power to work, people must have at least a minimum amount of money to vote with, and they must have the freedom to choose how to spend it.
The proposal for a negative income tax is a proposal to help poor people by giving them money, which is what they need, rather than as now, by requiring them to come before a government official to tally all their assets and liabilities and be told that you may spend X dollars on rent, Y dollars on food, etc.
3. To End the Welfare Trap
With a guaranteed income it pays to work. You can always work to earn more. However, the current welfare system punishes you for working. If you take a job and increase your income, you lose your benefits. A guaranteed income removes that disincentive to work, and allows everyone to earn more without being penalized.
The number of people on welfare has been skyrocketing. Why? Because once they get on welfare, we make it almost impossible for them to get off. In order for somebody who gets on to get off, he or she has to be able to have a really good job, because to get off gradually, to earn a little bit, now doesn’t pay…
4. To Enable Work
Removing the burden of needing to earn an income, even partially, will help enable people to do work that is otherwise not compensated in a free market economy, such as charity or volunteer work.
One of the great virtues of the negative income tax, in my opinion, is that by taking off the mass burden of income maintenance it would make it possible for private charitable organizations to do [charity work].
5. Justice & Equality
Civil Rights leader Martin Luther King proposed a guaranteed income to promote justice and equality. Milton Friedman (although more concerned with reducing government) agreed:
The virtue of [a negative income tax] is precisely that it treats everyone the same way…there’s none of this unfortunate discrimination among people.
For these reasons and more (economic recession, growing inequality, and technological unemployment) Americans and people all over the world continue advocating for a guaranteed income. Today it is commonly referred to as a “basic income” as most propose the minimum amount should be sufficient to provide for basic food and shelter.