Chapter Eleven Of Capitalism And Freedom By Milton Friedman

In 1962, distinguished economist and Nobel Laureate Milton Friedman published Capitalism and Freedom, a collection of essays that departs from mathematical economic models and instead unpacks economics’ real world relationship with public policy issues. In Chapter Eleven of Capitalism and Freedom, Friedman proposed a social policy called negative income tax (NIT) – a measure where individuals and families below a certain income level receive cash from the government, instead of paying taxes. Friedman argued that the $33 billion dollars that America used to fund a “rag bag of measures” in place to alleviate poverty would be better spent if put towards a NIT program. He writes:
The advantages of this arrangement are clear. It is directed specifically
To reach this goal, the experiment’s formulators employed the tax system as a policy vehicle. By relieving participants of their income tax obligation and administering (1) NIT only or (3) NIT and counseling/training to participants in the program, the experiment attempted to simulate what might happen if a NIT policy was implemented on a larger scale. Families received a cash payment based on a declining tax rate system so that the payment participants received would be inversely related to their income. In addition to NIT treatment, SIME/DIME subsidized career counseling and job-related training; participants receiving treatment of either (2) counseling/training only or (3) NIT and counseling/training would be given a subsidy to cover 50% or 100% of the cost of counseling or approved courses at the contracted community
For example, the involvement of state welfare programs allowed participating families and individuals to be vetted through existing state agencies. Additionally, in cases where families would otherwise be enrolled in Aid to Families with Dependent Children (AFDC), the federal share of the AFDC benefits were retained and repurposed for SIME/DIME