It is every elected officials’ favorite question: What to do with a budget surplus? The Post-Dispatch has a good article on the choices facing Missouri legislators now, and what officials from other states in the fortunate situation of a surplus have chosen to do. A budget surplus is truly an economic gift that keeps on giving, as a tax cut done because of the surplus expands the economy beyond what the pre-cut economy produced. A tax cut in response to a surplus, combined with budget discipline in general, can lead to a revolving cycle of healthy economic growth leading to budget surplusses allowing for tax cuts leading to even greater economic growth and continued surplusses. That is in the theoretical world – in the real world elected officials too often use the surplusses to fund new government programs which must be funded in future years no matter what the economic situation or future needs, resulting in more government programs continuing to hover over and around the economy.
I like Utah’s answer to the surplus – cut a little bit off every tax rate.
"Utah reduced its income tax, sales tax and business taxes."
Hawaii is condidering new programs for the state’s homeless – as if the homeless in Hawaii don’t already have it better than the rest of us. It’s Hawaii, for Christsakes! Virginia has paid for one-time transportation projects with its surplus, with some help from public-private partnerships. Missouri could certainly learn from that example.
Oregon and Nebraska are socking money away in rainy day and reserve funds.
Booo! Where is the fun in that? Do things really change so much in Nebraska that they need money in a rainy day fund? In case of emergency, it’s not like that have to get legislation through both houses of the legislature like every other state.
Missouri’s plans are fine – cutting taxes is good, but I would prefer a small, general cut for everyone to the large, targeted cut for senior citizens that looks likely. The franchise tax refuction is an excellent idea and will benefit Missouri’s economy. Maybe with a franchise tax cut we can finally get some outrageously overpriced coffeehouses to open here. Putting some money ($200 million now counts as ‘some money’) away for the future is ok, at small levels rainy day funds make sense – but I think the people of Missouri could do more with that money than the state could or will.
