"Friedman contributed to another important effort while in Washington during World War II. At the Treasury Department, he helped create the current federal income tax withholding system. Friedman says he now regrets his role, although at the time he believed the new system was superior to the one it replaced (Friedman and Friedman 1998, 123). Working in Washington gave him great insight and the chance for a firsthand look at how bureaucracies function. http://www.dallasfed.org/research/ei/ei0202.html
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Surprisingly, it was a free market economist who helped the federal government implement the withholding tax in the first place.
The Curse of the Withholding Tax, Ludwig von Mises Institute