Taxes and paradise

Last Friday, Martin Feldstein, a Harvard University economics professor, wrote a compelling op-ed piece in the Wall Street Journal (“The 28% Solution”). In this op-ed piece, Mr. Feldstein argued for a more substantial U.S. tax cut, claiming, quite convincingly, that President George W. Bush’s $1.6 trillion tax cut proposal does not quite go far enough.

In making his argument, Mr. Feldstein points out that an employee earning $50,000 a year essentially “faces a 50% overall marginal tax rate–a 28% federal income tax rate, a 15% payroll tax rate, and additional state and city taxes” (not to mention capital gains, excise, sales, estate, and various other “value-added” taxes).

In other words, mainland Americans pay a heck of a lot of taxes. Instead of waiting for President George W. Bush and the Republican Congress to pass a substantial tax cut, which is always subject to Democratic dilution, our beleaguered and tax-tormented mainland American brethren should probably book a flight to the CNMI and enjoy the fruits of their labors without having to worry about the greedy tax man pestering them all the time.

After all, the late Larry Hillbloom did it. He fled the confiscatory United States government and headed for our Pacific tax paradise.

Indeed, many graduating CNMI college students should return home for the same reason: to avoid the burden of unreasonable Federal/U.S. taxation. Why pay as much as 50% of every dollar you earn? Why bother to pay immoral property taxes? Head for the CNMI instead!

Article 12 is one significant consideration, but this does not apply to indigenous college graduates. Only non-indigenous mainland Americans may be discouraged by this Article 12 consideration. Why should mainland Americans fly to some unknown destination to save on taxes–only to be unjustly deprived of real property ownership?

Obviously, a fair tax system is not enough to entice investors. A reasonable and fair tax system is important, but it is merely the first step. It is a necessary but insufficient condition for a prosperous, thriving, modern island economy.

Capital may receive favorable tax treatment in the CNMI. Capital may well be attracted by our superior tax system.

Our tax system is a necessary incentive. But it is not enough. Labor is also needed to employ capital and make it even more profitable and productive.

What good is capital if the labor supply needed to properly employ it is severely restricted by labor moratoriums, three-year limits, non-market-based minimum wages and other inordinate regulations?

Strictly a personal view. Charles Reyes Jr. is a regular columnist of Saipan Tribune. Mr. Reyes may be reached at charlesraves@hotmail.com