WOW! Look Who's The Father of the EITC AKA Negative Income Tax (insurance, credit)
Please register to participate in our discussions with 2 million other members - it's free and quick! Some forums can only be seen by registered members. After you create your account, you'll be able to customize options and access all our 15,000 new posts/day with fewer ads.
In this particular dialogue with Wm F Buckley JR, Friedman seems to recognize the necessity of a safety net, but he is also concerned with disincentives to work plus the bureaucratic spying that results from the way the safety net is structured.
In this particular dialogue with Wm F Buckley JR, Friedman seems to recognize the necessity of a safety net, but he is also concerned with disincentives to work plus the bureaucratic spying that results from the way the safety net is structured.
it should be a well establish fact. Unfortunately it isn't.
To be fair, Uncle Milty envisioned the Negative Income Tax replacing all forms of government assistance: Welfare, Medicaid, Housing Assistance, Food Stamps, Unemployment Insurance, Medicare, Social Security, etc.
The EITC doesn't actually replace any form of government assistance...and Friedman was on record as being against the EITC for that reason.
To be fair, Uncle Milty envisioned the Negative Income Tax replacing all forms of government assistance: Welfare, Medicaid, Housing Assistance, Food Stamps, Unemployment Insurance, Medicare, Social Security, etc.
The EITC doesn't actually replace any form of government assistance...and Friedman was on record as being against the EITC for that reason.
To be even more fair this is more B. F. Skinner's idea on operant conditioning which is what EITC conforms to while all the others do not.
Johnston concludes his column on the following note:
Milton Friedman, the Nobel prize-winning Chicago School economist, proposed what became the EITC, a form of negative income tax, to encourage people to work. He noted that many people on welfare faced marginal tax rates of more than 100 percent if they left the dole for low-wage jobs. President Ronald Reagan championed the EITC because it required people to work to get benefits.
The credit provides its greatest benefits to people making from about $10,000 to $14,000. Earn more and the credit falls off. Work 1,300 hours at $10 an hour and you are in the sweet spot to get the biggest tax credit. Work an extra week and benefits slip.
If the earned income tax credit, combined with the end of welfare as we knew it, hold down wages for low-skill workers then it is time to find smarter ways than Chicago School theories to reduce poverty for those who work. [Emphasis added]
To my great surprise, Johnston doesn’t reference the work of Berkeley economist Jesse Rothstein, who is much-admired, particularly in left-of-center circles, for his careful empirical work. Rothstein argues [subscriber-link; NBER has a subscriber-link to an earlier version] that the EITC is actually quite different from the traditional negative income tax, and that this is precisely the problem with the EITC.
The confusion is understandable. Milton Friedman championed a negative income tax (NIT) and many people believe that the EITC and the NIT are essentially the same. For example, consider Robert H. Frank’s take in 2006. After briefly describing Friedman’s NIT proposal, he writes:
Mr. Friedman’s policy prescriptions were shaped by his desire to minimize adverse economic incentives, a feature that architects of earlier welfare programs had largely ignored. Those programs, each administered by a separate bureaucracy, typically reduced a family’s benefits by some fraction of each increment in earned income. Rates of 50 percent were common, so a family participating in four separate programs might see its total benefits fall by $2 for each extra dollar it earned. Under the circumstances, no formal training in economics was necessary to see that working didn’t pay. In contrast, someone who worked additional hours under Mr. Friedman’s plan would always take home additional after-tax income.
The negative income tax was never adopted in the end, because of concern that a payment large enough to support an urban family of four might induce many to go on the dole. With a payment of $6,000 per person, for example, rural communes of 30 would have a pooled annual payment of $180,000, which they could supplement by growing vegetables and raising animals. Because these groups could live quite comfortably at taxpayer expense, there would be an eager audience for accounts of their doings on the nightly news. Political support for such a program would be difficult to sustain.
Instead, Congress adopted the earned-income tax credit, essentially the same program except that only people who were employed received benefits. One of the few American welfare programs widely adopted in other countries, the earned-income tax credit has proved far more efficient than conventional programs, just as Mr. Friedman predicted. Yet because it covers only those who work, it cannot be the sole weapon in society’s antipoverty arsenal. [Emphasis added]
To be most fair, I never claimed that Milton Friedman invented the Negative Income Tax, just that he was an enthusiastic proponent of the concept.
As for the rest, it looks like Chuckmann nailed it.
Not saying I have a problem with what you or Chuckman said. It was in the context of adding information. The key to it from Milton's standpoint was incentives which many other programs have perverse ones. That is BF Skinner stuff.
Interesting because so many conservatives want to nominate Reagan for sainthood (Friedman ineligible because he was Jewish-LOL) want to kill off a program he championed.
Interesting because so many conservatives want to nominate Reagan for sainthood (Friedman ineligible because he was Jewish-LOL) want to kill off a program he championed.
That is because the current crop of republicans are complete idiots. Sherman Anti-trust laws , natural monopoly, public infrastructure where all part of their planks. They were capitalists.
But then so are the modern democrats who no longer stand for labor and decided on welfare and identity politics.
What is:
welfare state vs fiance and landed gentry
What was:
capital vs labor.
Guess which one makes an actual product.
Please register to post and access all features of our very popular forum. It is free and quick. Over $68,000 in prizes has already been given out to active posters on our forum. Additional giveaways are planned.
Detailed information about all U.S. cities, counties, and zip codes on our site: City-data.com.
Please register to participate in our discussions with 2 million other members - it's free and quick! Some forums can only be seen by registered members. After you create your account, you'll be able to customize options and access all our 15,000 new posts/day with fewer ads.
