George, the late Jude Wanniski was one of the few people to actually try to figure out what the marginal tax rates were in places like the poorest countries in Africa.
What he found was staggering:
That?s right. A marginal tax rate on agricultural profits of 89% at $4,235. The tax system in Ethiopia is designed specifically to bring about the starvation of the entire population of 67 million. Can you believe a ?corporate farm? that has a profit of $4,235 in annual income must pay the government 89% of any dollar of profits over and above that amount? How can this happen?
Wanniski also noted other brutal aspects of the Ethiopian tax code, such as no personal allowances, which makes gross income equal taxable income, and monthly tax rates, meaning that one big cyclical payout is not averaged across the entire year, but taxed at rates starting at 20 percent. Plus a 15 percent VAT was in place. Capital gains were double taxed at 15 and 30 percent rates.
Zimbabwe had a 45 percent marginal tax rate that kicked in at $500 of income, then a 30 surcharge on the tax you owed! Plus a 20 percent VAT.
Wanniski deduced that these anti-wealth, anti-development tax codes were the result of years of high inflation combining with non-indexed, highly progressive income tax systems. Not suprisingly, they also did not collect much revenue as there was virutally no incentive to produce anything.
In 2003, Wanniski estimated that 67 million Ethiopians paid all of $1 billion in tax.
Clearly the government should take that revenue and pour it all into education and training so that people can find out about America and get the hell out of there.
