December 22, 2015
Chris Dock | LPMN Chair
Once again, the State of Minnesota is announcing a budget surplus of just under $1.9 billion, with the forecast of a $2 billion surplus for the 2016-17 fiscal budget period. Depending on who is doing the analysis, there are many factors that are referenced as contributing causes of the surplus:
- a strong stock market allowing people to sell investments that generate capital gains taxes
- increased consumer spending resulting in a higher level of sales taxes being collected
- less-than-expected state spending on Medicaid
- the more generic “we now have a stronger economy” reference
Mark Dayton referenced the surplus being the result of a “good job” being done by the government. Is it? If we had been taxed an additional $1.9 billion with no changes in spending, would the resulting surplus of $3.8 billion be twice as good as the current surplus? Contrary to the following meme, that’s not responsible budgeting, that’s over-taxation.
The cause of a budget surplus is that the government didn’t spend as much as they received in tax receipts; conversely, the cause of a budget surplus is that the government didn’t collect as much in taxes as they spent. But is one situation obviously better than the other?
Regardless of whether we experience a budget surplus or a budget deficit, the taxation and spending situation is the same – the government taxes its citizens too much AND it spends too much; it’s just a calculation of how those two over-sized numbers relate to each other.
In years when there is a budget surplus, the government tries to determine ways to spend the extra money that is available. In years when there is a budget deficit, the government tries to determine how to increase tax revenue to cover their spending. Thus, in a never-ending cycle, we exacerbate the problem by alternately raising taxes when there is a deficit and raising spending when there is a surplus.
How should the government determine its budget?
- First, determine the essential services government must provide to its citizens
- Second, determine how much it would cost to provide those services
- Third, determine the level of taxation that would provide the appropriate tax revenue to cover those costs (and generate this taxation fairly, not via a 70,000+ page tax code that is riddled with special treatment provisions for those who bought them by contributing to or lobbying elected officials)
In the absence of this budget process (or as we move towards it), how should the government respond to a budget surplus or a budget deficit?
- Budget surplus – reduce spending, and reduce taxes by more than spending is reduced
- Budget deficit – reduce taxes, and reduce spending by more than taxes are reduced
If the government implemented this approach, it would be a step towards doing a “good job.”
Concerned about the expansion of government control and the erosion of individual liberty? Please consider joining and becoming active with the Libertarian Party of Minnesota. Libertarians support liberty on all issues, all the time! Libertarianism is a philosophical and political movement to promote personal freedom, strong civil liberties, a genuinely free marketplace, and peace.
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