Friedman conceived of the negative income tax as a way of channeling income redistribution through the federal tax system, thereby eliminating the excessive administrative costs associated with dedicated welfare programs. With each annual tax submission, those whose income fell below a certain threshold would receive a sum of money in return, guaranteeing them an annual basic living wage. By replacing in-kind welfare with the most liquid form of benefit—cash—Friedman thought that the negative income tax would encourage the poor to behave as responsible free market actors. With its minimal but efficient system of redistribution, the negative income tax would bypass the disabling paternalism of the welfare state and undermine the entrenched power base of liberal welfare bureaucrats. It would also eliminate the moral hazards embedded in the old AFDC program—that of promoting nonwork and family breakdown—by extending subsidies to those in low-wage work and intact families.

Dieter Plehwe, Quinn Slobodian & Philip Mirowski (eds.), Nine Lives of Neoliberalism, loc. 232