March 26, 2002

March 26, 2002 | Commentary on Taxes

Feeling Undertaxed?

Even with the economic recovery underway, state lawmakers nationwide are finding it tough to balance their budgets. As a result, many have been lobbying for - you guessed it - higher taxes.

They haven't made much headway in Arkansas, though. Gov. Mike Huckabee has refused to sign off on tax hikes, provoking howls of protest from those who warn of cutbacks in "vital" state programs.

Gov. Huckabee prefers to do what real-world people do when faced with tight budgets: Cut spending. (It's not as if the average citizen has the option of taxing someone when it looks as if he or she won't make this month's mortgage payment.)

But the governor doesn't want to stand in the way of those who want to pay more. "There's nothing in the law that prohibits those who believe they aren't paying enough in taxes from writing a check to the state of Arkansas," he said.

So in December, Gov. Huckabee created the "Tax Me More Fund," so people who consider themselves undertaxed can donate more to the state government.

Sounds reasonable. Surely those who derided the governor for his opposition to tax hikes would open their wallets for the sake of the "vital" programs they hold dear.

That's the theory, anyway. But things have worked out differently: At last report, the fund had raised about $1,900.

The Arkansas story illustrates what we already know: We're not undertaxed. In fact, we're overtaxed. And it costs us: According to the National Taxpayers Union (NTU), Americans shell out an average of 35 to 40 percent of their earnings each year in taxes. A relentless array of federal, state and local taxes chip away at our paychecks, while sales taxes and registration fees siphon off even more. The mortgage, utilities, food, etc., come out of what's left.

Most financial planners say it's smart to create a "rainy day" fund equivalent to six-months' worth of expenses. But most people have little disposable income after the government takes its share, so saving that much money could take years. Meanwhile, the car needs new tires. The washing machine breaks down. The roof starts leaking.

Now, it's clear that Gov. Huckabee didn't expect his "Tax Me More Fund" to do more than highlight the hypocrisy so prevalent among the tax-hiking elite. It seems that was the goal in Kansas, too, where state legislators opposed to Gov. Bill Graves' plan to raise taxes -- rather than cut unnecessary spending -- set up a "Tax Me More Fund," too.

It's an attractive idea. Lawmakers in Arizona, California, Massachusetts and Virginia also have considered creating "Tax Me More" funds. We encourage more.

The lesson these funds teach is simple: Americans don't want to pay more taxes. An NTU poll found that, by a margin of 63 percent to 26 percent, Americans prefer to accelerate the tax-rate reductions President Bush signed last year-or enact additional cuts.

But tax-hikers don't see it that way. While most families and individuals peg their spending to their income, tax-hikers do the opposite. They figure out how much they want to spend and then find creative new ways to gouge it out of us. It stems from a flawed belief that taxpayers exist to serve government.

Deep down, though, most Americans understand that it's really the other way around. Otherwise, Little Rock's "Tax Me More Fund" would be overflowing.

Edwin Feulner is president of The Heritage Foundation, a Washington-based public policy research institute.

About the Author

Edwin J. Feulner, Ph.D. Founder, Chairman of the Asian Studies Center, and Chung Ju-yung Fellow
Founder's Office