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Milton Friedman's Legacy

by Michael Tasselmyer / /

As a Nobel laureate, winner of the Presidential Medal of Freedom, and founder of the Chicago school of economic theory, few would argue that Milton Friedman's economic philosophy hasn't been widely influential. However, his modern fame and recognition make it possible to forget that in the beginning of his career, he faced great opposition to his work and few would have predicted it would earn him the respect it has today.

A 2006 memoriam in The Economist offered some perspective:

"In the wake of the Great Depression and the second world war, with the Keynesian revolution still young, championing the free market was deeply unfashionable, even (or especially) among economists. Mr Friedman and kindred spirits -- such as Friedrich von Hayek, author of 'The Road to Serfdom' -- were seen as cranks. Surely the horrors of the Depression had shown that markets were not to be trusted? The state, it was plain, should be master of the market; and, equipped with John Maynard Keynes's 'General Theory', governments should spend and borrow to keep the economy topped up and unemployment at bay. That economists and policymakers think differently now is to a great degree Mr Friedman's achievement."

Friedman was a tireless advocate for smaller government, and took a staunch position when it came to tax reform: "I am in favor of reducing taxes under any circumstances, for any excuse, for any reason whatsoever." One of Friedman's major contentions with the U.S. tax system that he frequently lamented was its complexity. The tax system, he said, was an "unholy mess" that was so dominated by special interests and lobbying groups that he went so far as to claim reform was "impossible." Despite his pessimism regarding tax reform, he saw some of his ideas translated into reality after the Code was revised in 1986.

Had Friedman had his way, though, he likely would have supported one of two alternative tax systems.

  • He was known as a supporter of the "negative income tax," which would offer a stipend to those earning incomes below a certain threshold. He argued that doing so offered the poverty-reducing benefits of programs like food stamps and rent subsidies, but without the bureaucratic inefficiencies that usually accompany them. In other words, as the New York Times put it, "[i]f the main problem of the poor is that they have too little money, he reasoned, the simplest and cheapest solution is to give them some more."
  • Friedman also supported a flat tax system in his well-known 1962 work "Capitalism and Freedom." He told the Wall Street Journal in 1996 that "[a]ll things considered, the personal income tax structure that seems to me best is a flat-rate tax on income above an exemption."

July 31 would have been Milton Friedman's 102nd birthday. In celebration of his life and work, NTUF is hosting a happy hour event with Liberty on the Rocks D.C. and the Tax Foundation in downtown Washington, D.C. tomorrow evening (Tuesday, July 29). The event will feature discussion of Friedman's influence and a school supplies drive benefitting Perry Street Preparatory School, a local charter school whose independent status represents the education reforms Friedman spent so much time and energy advocating for.

If you can't make it in person, we're also hosting an online poll asking participants which tax reform proposal they'd like to see enacted. Friedman proposed a flat tax, but would you prefer a FairTax or Value Added Tax? Let us know, and you'll be entered to win a $50 Visa gift card!