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Originally Posted by Rerun
I should add that there is a 4th way to deal with a surplus. Reduce taxes. If you have a significant surplus its pretty obvious that your taxation rate is too high. Reducing taxes encourages investment and is good for the economy and is a win-win all around.
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Reducing taxes doesn't help though if the revenue is the result of high resource prices. If you reduce taxes when there is a lot of money coming in you then have to raise taxes as the price drops. Using corporate taxes as an example an oil company would pay a lower tax rate when they were making more money and their tax rate would go up when their margins are shrinking.