Memo To: President Bill Clinton
From: Jude Wanniski
Re: Taxation in Black Africa
If you happen to be home today, Mr. President, you surely saw the front-page article in the New York Times, “Niger’s Anguish is Reflected in Its Dying Children,” by one of its best correspondents, Michael Wines. If you watch “The Jim Lehrer News Hour,” as I expect you frequently do, you will have watched Margaret Warner, one of the best reporters in the national news media, interview an “expert” on poverty in Africa in a segment, “Famine in Niger.” In these accounts, you will have learned the terrible statistics of how 15 children die of starvation every day in Niger, that of every 1000 children born there, 262 fail to reach their fifth birthday, and that $300 million in the world’s annual aid to the 12 million people of Niger goes mainly to “debt relief,” i.e., is paid directly to the western banks and the IMF & World Bank that loaned funds to Niger in the past.
What you would not have read, Mr. President, is that there is no way Niger can ever climb out of its staggering poverty with the tax system that has evolved there under the guidance of the IMF and World Bank. In a minute, I’ll shock you with that news, which NYTimes, its reporters or columnists, refuse to report as hard as I hammer at them. But first I’ll tell you why I’m writing this open memo to you.
The proximate reason is the CNBC interview you gave on July 12 to Ron Insana. It was the first I was informed that you are dedicating yourself to pulling Black Africa out of the ditch. Yet I must tell you with absolute certainty that the game plan you envision with the G-8 heads of state toward that end cannot accomplish your worthy goals. It is cart before the horse, and it will be impossible for any of the targeted countries to "improve governance" as a pre-condition for getting financial aid. The answer does not lie in sending cash either, because that only goes to pay the banks and the World Bank who sold them on predatory loans in the first place. The answer lies in changing the conditionality of loans or debt relief, the conditions being they reform their tax and monetary policies. After decades of inflation and tax increases, the Sudan has a top income-tax rate of 30% encountered at $54 a year!! Plus a dozen other tax gates that smother economic growth and produce little or no revenue for the government.
But what of Niger? I told you that you would be shocked, as I was today when I went to my sources to check on Niger’s tax system. I found that the 16% income-tax rate is encountered at roughly $200 a year and that the top rate of 52% is encountered at about $600 per year!! Capital gains is taxed at ordinary rates, which means that virtually any investment in the country that produces a gain means more than half goes to the government. Of course there is no investment under those conditions, and I will assure you that the government gets no revenue from the capital gains tax… and that it pays its tax collectors more to collect the income-tax than they receive in revenue. The corporate tax rate is 30% for residents and 40% for non-residents, at least on the data I got from the good people on the staff of your friend and mine, Rep. Charlie Rangel, who got the data from the Library of Congress.
What really blew my mind, though, was finding that Niger’s Value-Added Tax, which until April was 17% ON TOP of the confiscatory rates on income, was increased to 19% in April in the midst of the famine and starvation!! There were so many riots across Niger, twice the size of Texas, that within a week the government decided to exempt a few items from the tax. But there is zero chance the people of Niger can climb out of the deep pit the IMF and World Bank has dug for it unless YOU make it happen.
I’ve been breaking my pick on this issue within the Republican Party for years and years, Mr. Clinton, begging political leaders or journalists to cry out against this true crime against humanity. The fact is, the GOP really never focuses on helping poor people. It just isn’t set up that way. This is not a patch on the GOP, as it has all it can do to make the investment class interested in doing what it takes to expand the U.S. economy. When Republicans think of Niger, they think of the corruption of its leaders and will brush off my arguments that the country – like Sudan and most other black African nations – are being strangled by the intersection of inflation and tax systems.
It is the Democratic Party that is set up to focus on the bottom ranks of the socioeconomic pyramid, here in the U.S., but also in the world at large. It hasn’t done so, perhaps because it hasn’t even been aware of what’s been going on. On July 8, a few days before I saw you interviewed by Ron Insana, I wrote a memo on this topic, almost despairing that my simple solution for Africa’s poverty could make it in time to prevent the starvation and deaths of tens of millions of people. But I somehow think if you would take an interest in this aspect of the problem, that catastrophic holocaust can be prevented.