Milton Friedman

Overview

Milton Friedman (1912–2006), Nobel laureate and the most influential free-market economist of the 20th century, is an unlikely but important witness for land value taxation. Generally hostile to taxation, Friedman made a notable exception for the tax on land.

"The Least Bad Tax"

In a 1978 interview, Friedman remarked that "the least bad tax is the property tax on the unimproved value of land, the Henry George argument of many, many years ago." The quotation is among the most cited in the Georgist literature precisely because it comes from an economist with no Georgist sympathies — it reflects the cross-ideological consensus that a tax on a fixed factor causes no deadweight loss. It is regularly assembled alongside endorsements from William Vickrey, Joseph Stiglitz, and others in surveys of mainstream economists on Georgism.

The Negative Income Tax and the Citizen's Dividend

Friedman is also the modern originator of the negative income tax (NIT) — a scheme in which people below an income threshold receive a payment rather than pay tax, which he first set out in Capitalism and Freedom (1962) and defended in "The Case for the Negative Income Tax: A View from the Right" (1966). The NIT is a direct ancestor of today's universal basic income proposals and a recurring reference point in citizen's dividend discussions, where a per-person distribution of land rent is one funding route and an income-tested NIT is a frequently proposed, more progressive alternative to a flat per-household credit (see, e.g., the Canadian distributional analysis). Friedman's two contributions thus bracket the Georgist policy package from the right: a tax base he could endorse (land) and a distribution mechanism he designed (the NIT).

Significance

Friedman's endorsement demonstrates that the efficiency case for LVT does not depend on accepting George's broader moral philosophy: even a thinker committed to minimal taxation concedes that, if you must tax, land is the place to do it.

See Also

• Deadweight Loss · Land Value Tax · Citizen's Dividend · Modern Georgism of Respected Economists

Sources

1. Milton Friedman, interview, "Milton Friedman Interviewed" (unsigned news story), The Times Herald, Norristown, Pennsylvania, Friday, December 1, 1978. Full text reproduced by the School of Cooperative Individualism, which reprints the interview verbatim from the original. In it, answering which taxes are least harmful, Friedman states: "So the question is, which are the least bad taxes? In my opinion the least bad tax is the property tax on the unimproved value of land, the Henry George argument of many, many years ago. The next least bad tax is a flat-rate tax on income above an exemption." The same interview appears to have run earlier as "An Interview with Milton Friedman," Human Events 38(46), November 18, 1978, p. 14 — the citation given by Fred Foldvary in his Progress.org profile of Friedman. — used for the "least bad tax" quotation and its framing as a cross-ideological efficiency concession (A-claim for the quotation).
2. Milton Friedman (1962), Capitalism and Freedom, University of Chicago Press, ch. 12; and Friedman (1966), "The Case for the Negative Income Tax: A View from the Right," in Proceedings of the National Symposium on Guaranteed Income (U.S. Chamber of Commerce), pp. 49–55 — used for his authorship of the negative-income-tax proposal and its date (A-claim). Symposium paper archived at the Milton Friedman collection, Hoover Institution; overview in Robert A. Moffitt, "Milton Friedman, the Negative Income Tax, and the Evolution of U.S. Welfare Policy" (IRP Discussion Paper 1260-03, 2003).