What to Do With the Budget Surplus

An op-ed in the Springfield News-Leader argues that Missouri shouldn’t spend its budget surplus:

To fairly address this excess, the government should either refund the $320 million to taxpayers or pass comprehensive tax cuts for all Missourians.

I think the second option is much better policy. If you give people a one-time rebate, they’ll spend the money or put in in the bank, then go back to business as usual. But if you cut taxes, people will change their plans, investing more in education and capital because they expect to reap higher after-tax returns. That can have effects far into the future.