There are tempting alternatives. Keep the money, and throw away the wallet. Keep the money, and return the wallet, claiming there was no money in it when you found it. You might even contact the owner and try to negotiate a reward for its return. But to the moral person, there’s really no choice. You return it to the owner, who may or may not decide to reward you.
Many of our legislatures, at both the state and federal levels, were faced with this problem during boom years not that long ago. They set a tax rate that was supposed to cover their budgeted expenditures, and a robust economy brought in more revenue than they had expected. And of course, being moral persons, they returned the surplus to the taxpayers.
Well, that may have happened somewhere, but not to my knowledge. What I saw was legislatures pretending they didn’t know whose money it was, and finding new things to spend it on. Expenditures they could not justify in the normal budget process, they now did not have to justify so carefully, because of the unexpected windfall.
This is how governments work in good times, even when the surplus is predictable. If tax revenues are expected at above-normal levels, politicians see it as an opportunity to fund optional items, things that aren’t really necessary. Who will begrudge them when revenues are strong? Tax cuts? They are not necessary, after all, people are doing well.
What happens when tax revenues fall short of expectations, because the economy turned weak? Then the politicians argue for more money. “We can’t cut essential services, now, when people are depending on them more than ever.” “We must spend to stimulate the economy.” Tax cuts? They are not possible, after all, when people are doing poorly.
It’s like the lazy homeowner, or unscrupulous landlord, if you prefer that scenario, who refuses to fix a leaky roof. (“Can’t fix it now, in the rain.” “It’s not raining now.” “It’s not leaking now.”) It’s never the right time for a tax cut.
That’s why the tax cutters must remain firm against the tax-and-spenders and the class warfare mongers who propose a compromise, a little spending reduction along with a little “revenue enhancement.” The spending reductions always prove to be illusory, or at best a temporary reduction in the rate of growth of spending, while the tax increases quickly become firmly entrenched, its beneficiaries ready to resist any future reform. We don’t have a revenue problem, we have a spending problem.
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