NCPA - National Center for Policy Analysis

Economic Success In The U.S. Marianas

June 1, 1997

The fourteen tiny islands known as the Northern Marianas in the western Pacific have languished in poverty for years, but are now flourishing.

A U.S. acquisition of World War II, negotiations in the 1970s led to the establishment of the Commonwealth of the Northern Mariana Islands -- a self-governing entity under U.S. sovereignty. The natives became U.S. citizens -- although without the right to vote and not burdened with U.S. income taxes -- most other federal laws applying.

  • The Commonwealth of the Northern Mariana Islands reserved the right to control minimum wages, immigration rules and customs.
  • It slashed income taxes by 90 percent, cut capital gains to half the U.S. rate, reduced excise taxes and eliminated import duties.
  • There are no inheritance, property or sales taxes in the islands.

As a result the economy has exploded.

  • In 1970, the approximately 1,000 indigenous people had annual wages of $1.5 million, mostly from government -- and the total number of hotel rooms in the islands was 83.
  • The islands were essentially living off U.S. government welfare.
  • But by 1986, the boom was underway, and by 1995 the islands boasted 3,600 hotel rooms attracting 650,000 tourists who spent $522 million that year.
  • Total gross commercial revenue grew from $244 million in 1985 to $1.5 billion in 1994.

Government revenues have increased from $5 million in 1978 to $220 million in 1996, and the U.S. contribution to government operations ceased entirely in 1992.

Source: Ronald Bailey, "America's Hong Kong," American Enterprise, May - June, 1997.

 

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