I read somewhere recently that Thomas Paine wasnt as conservative as you think. He thought that taxes should be more than what we spend, and we should use that surplus as basically...welfare.

So my question to you guys is: In an ideal libertarian society, would we tax to a surplus? And if so, what do we do with that extra money, if anything at all?

You sure you arent confusing libertarianism with anarchy?

Military? Courts? Police? Surely law enforcement and defense are the two areas that the private sector SHOULDNT handle. Also you should probably pay politicians at least a little bit. The president cant be expected to live off his savings for 4-8 years? What about international meetings? President suppose to pay for his own jet to fly to Iran for peace talks? Secret Service? Developing of military technology so that if a war ever does happen, we actually have a chance?

The question was "ideal libertarian society".  Anarchy is lawless, chaos, no one in charge of either a government or private sector and doing what ever they want.
http://en.wikipedia.org/wiki/Anarchy

An ideal libertarian society has order and most things are privately run. Limited government doesn't require much taxes if any.

Being the anarcho-capitalist that I am, I feel I should come out in violent opposition to taxation. However, the pragmatist in me forces me to think about a gradual reduction of the state and how we could use the government to get to a point of absolute liberty (Props to Murray Rothbard for showing me this is a workable combination).

I use "libertarian" to describe everything from paleoconservative to anarcho-capitalist, so libertarians could support some or no taxation, some or no government. But, if you base libertarianism on the non-aggression principle, you couldn't have a government of any kind that wasn't voluntary, therefore, you couldn't have taxes.

Now, to the pragmatist: If we're going to survive much longer without a complete and chaotic collapse of the western world's governments, we're going to need to get our fiscal house in order. Call me a cold warrior, but I'd still rather live in Canada, the Netherlands, Switzerland, etc. than in China, Russia, or India (powers whose governments could stand and expand their influence while ours collapse). So, I think we need to couple slashing spending with a general tax decrease and rearrangement -- we should tax consumption and not income, savings or capital gains. But we should still tax more than what we are spending (after the budget cuts) so that we can pay off our debts. Once they are gone, we can begin peacefully phasing out what little remains of government.

Conservative prime minister David Cameron of the UK said his cabinet would be taking something like a 7-10% cut to their salaries in order to help weather the economic crisis. Libertarian activist Adam Kokesh said, if elected to the House, he would only accept a salary that was the same as the per capita income of US citizens. Then there is Ron Paul who returns a part of his Congressional office budget every year and refuses to take part in the Congressional pension scheme.

If governments are looking to cut their budgets (which I think has to be done if the West is to survive) they should start with themselves. I have always thought a winning platform for a poltician would be to do as Kokesh did and promise to only take the per capita income, that way they are incentivised through self-interest to vote for bills that will increase it. As for presidents and prime ministers, if they want to do something to show they are willing to help the nation, they shouldn't accept any salary. Do the job for free if it is really about doing what is best for their country.