Have you ever put on a jacket or pair of pants and found a $20 bill in the pocket? Or got to the end of the month and realized you have more money left than you thought? It’s a great feeling isn’t it? You feel like you have the freedom to go and spend it on something fun, whether lunch out with friends to something you’ve wanted for a while like a new phone or putter (if you’re like me).
For us casual citizens, extra money is always a good thing. But for governments, there can be too much of a good thing. While it’s certainly true you never want a government deficit spending, if the government has too much extra money lying around usually one of two things happens. The wrong path is when the government grows in size in order to find a way to spend the extra money it has. This can be on recurring expenses like new bureaucracies or programs. Or it can be on “one-time” splurges like a subsidy for a new stadium. The better alternative is to give citizens back the taxes they collected and don’t need. Giving people back their money puts it in the productive private sector of the economy where it can be invested, spent, or used more efficiently.
Beacon’s newest report Made of Money: Tennessee’s Tax Cuts, Growing Surplus, and Future Opportunities highlights how Tennessee is faced with this good problem right now and provides recommendations to policymakers on how to best utilize recent historic surpluses. Some key findings from the report include:
- Tennessee’s history of conservative budgeting and cutting taxes has made the state one of the freest and wealthiest states in the country.
- While the state government has historically had small surpluses, they have exploded since the COVID-19 pandemic.
- Since May 2020, monthly revenues have exceeded projections by nearly 20 percent on average for over $10 billion.
- Despite strong revenues, the state’s rainy-day fund is surprisingly below average, at 36th out of 50. This shortfall represented $724 million.
- The state’s strong surpluses provide the opportunity for further permanent tax cuts including repealing the Business Tax and cutting the sales tax on groceries.
To read more about the state’s fiscal health, its large surplus and how to best return it to Tennessee taxpayers, click here.