Source: Tax Foundation http://www.taxfoundation.org/taxingspending.html and the University of Michigan http://www-personal.umich.edu/~mejn/election/

Federal Taxing and Spending Benefit Some States, Leave Others Paying Bill

Plotted by TWP from the data in the Table below.  The lower 2004 U.S. election map is weighted by the population

New Mexico gets $1.99 for every dollar in taxes, New Jersey only 57 cents

WASHINGTON, D.C.—Some states feast at the expense of others, according to the Tax Foundation’s latest annual analysis of federal taxing and spending patterns.

All taxpayers know that the federal government uses tax and spending policy to redistribute income from citizens with high incomes to those who make little, but citizens are less aware about geographically based income redistribution. Tax Foundation Senior Economist Scott Moody compares the federal tax burden in each state with Census Bureau data (2003) on federal spending in each state. The result is a ranking of which states got the best deal in 2003 from Uncle Sam’s tax and spending policies.

Federally Favored States
“During fiscal 2003, taxpayers in New Mexico benefited the most from the give-and-take with Uncle Sam,” said Moody. New Mexico received $1.99 in federal outlays for every $1.00 the state’s taxpayers sent to Uncle Sam. Other big winners were Alaska ($1.89), Mississippi ($1.83), and West Virginia ($1.82). (See tables below).

The District of Columbia’s Special Status
Though not comparable as a state, the District of Columbia is by far the biggest beneficiary of federal spending: In 2003 it received $6.59 in federal outlays for every dollar its taxpayers sent to the U.S. Treasury.

“The District’s share of federal largesse amounted to $60,109 for every man, woman and child,” said Moody. “That’s more than ten times the national average.”

States That Help Others
If some states are beneficiaries, then naturally some must be benefactors—those states where so much is collected in federal taxes that any federal spending they receive is overwhelmed.

New York has often been the biggest payer in the Tax Foundation’s annual comparison of taxes to spending, which inspired Daniel Patrick Moynihan and the Kennedy School of Government to launch their annual reference book comparing state taxes with spending (www.ksg.harvard.edu/fisc99) more than 25 years ago. In recent years, however, other states have eclipsed New York for the “blessing” of being the state that gives far more than it receives.

Combining the third highest tax burden per capita with the ninth lowest federal spending, New Jersey had the lowest federal spending-to-tax ratio (57¢). Other states that had low federal spending-to-tax ratios in FY 2003 are New Hampshire (64¢), Connecticut (65¢), Minnesota (70¢), Nevada (70¢), and Illinois (73¢).

Changing Ranks
The state that raised its ratio the most over the past ten years is Alaska where federal spending rose from $1.30 to $1.89 for each dollar in taxes. This 59-cent increase beats out Alabama, where federal spending increased 35¢ per dollar of tax, West Virginia (33¢ more spending per dollar), and Kentucky (32¢ more spending per dollar).

States where the ratio dropped most are Colorado and Massachusetts. Colorado has seen its federal spending-to-tax ratio fall 20¢ from $1.00 in FY 1994 to 80¢ in FY 2003. Massachusetts’s has dropped 18¢.

What Affects Rankings?
Federal spending on defense and other procurement dollars are often funneled to the states of powerful Members of Congress, and state governments can grab more federal grant money by skillfully manipulating their spending to comply with federal regulations.
However, demography may be more influential than politics. States with more residents on Social Security, Medicare and other large federal entitlements are bound to rank fairly high. Similarly, the high spending levels in Virginia, Maryland and the District of Columbia are explained by the predominance of federal employees.

On the tax side of the equation, states with higher incomes per capita—New Jersey stands out—pay much higher federal taxes per capita because of the income tax’s progressive structure. The citizens in these high-income, high-tax states do not always live better or save more than people in low-income, low-tax states because the cost of living is usually that much higher or more.

Adjusted Federal Expenditures Per Dollar of Taxes
Over Time by State
Fiscal Years 1994-2003
State 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003
Alabama $1.34 $1.31 $1.33 $1.37 $1.39 $1.42 $1.50 $1.54 $1.61 $1.69
Alaska 1.30 1.21 1.27 1.34 1.36 1.48 1.58 1.58 1.82 1.89
Arizona 1.11 1.13 1.11 1.08 1.10 1.16 1.18 1.14 1.20 1.23
Arkansas 1.24 1.22 1.24 1.30 1.31 1.33 1.39 1.46 1.53 1.47
California 0.98 0.94 0.93 0.92 0.90 0.87 0.81 0.81 0.81 0.78
Colorado 1.00 0.95 0.96 0.91 0.91 0.88 0.84 0.82 0.79 0.80
Connecticut 0.67 0.68 0.69 0.67 0.70 0.69 0.66 0.67 0.64 0.65
Delaware 0.79 0.84 0.85 0.84 0.85 0.90 0.88 0.85 0.84 0.82
Florida 1.06 1.07 1.08 1.07 1.05 1.06 1.07 1.04 0.99 1.00
Georgia 0.99 0.96 0.97 0.97 0.97 0.97 0.99 1.02 1.01 0.95
Hawaii 1.29 1.26 1.37 1.40 1.47 1.47 1.45 1.48 1.51 1.58
Idaho 1.12 1.14 1.15 1.16 1.22 1.20 1.22 1.27 1.34 1.32
Illinois 0.74 0.74 0.75 0.77 0.78 0.79 0.81 0.80 0.77 0.73
Indiana 0.82 0.84 0.89 0.92 0.93 0.95 0.99 1.01 0.99 0.96
Iowa 1.10 1.06 1.08 1.06 1.12 1.17 1.11 1.21 1.22 1.06
Kansas 1.07 1.05 1.03 1.02 1.07 1.11 1.07 1.16 1.14 1.13
Kentucky 1.20 1.28 1.28 1.33 1.36 1.32 1.38 1.38 1.45 1.52
Louisiana 1.35 1.35 1.28 1.31 1.27 1.37 1.41 1.42 1.44 1.47
Maine 1.35 1.31 1.32 1.33 1.34 1.31 1.27 1.24 1.31 1.36
Maryland 1.27 1.27 1.25 1.24 1.30 1.28 1.27 1.24 1.31 1.34
Massachusetts 0.97 0.92 0.91 0.90 0.88 0.87 0.80 0.80 0.79 0.78
Michigan 0.79 0.77 0.78 0.82 0.83 0.85 0.88 0.91 0.89 0.86
Minnesota 0.79 0.78 0.76 0.80 0.81 0.83 0.84 0.81 0.76 0.70
Mississippi 1.61 1.54 1.61 1.56 1.53 1.60 1.72 1.81 1.84 1.83
Missouri 1.34 1.29 1.40 1.24 1.24 1.24 1.26 1.29 1.32 1.31
Montana 1.43 1.46 1.48 1.54 1.55 1.71 1.56 1.62 1.63 1.60
Nebraska 1.06 1.01 1.00 1.02 1.05 1.08 1.14 1.19 1.19 1.06
Nevada 0.71 0.73 0.78 0.73 0.75 0.75 0.77 0.76 0.73 0.70
New Hampshire 0.73 0.75 0.76 0.74 0.76 0.73 0.72 0.71 0.68 0.64
New Jersey 0.69 0.68 0.69 0.71 0.71 0.70 0.70 0.66 0.62 0.57
New Mexico 1.88 1.86 1.85 1.84 1.85 1.88 2.08 1.93 1.89 1.99
New York 0.85 0.87 0.86 0.87 0.87 0.86 0.87 0.81 0.80 0.80
North Carolina 0.93 0.95 1.01 1.01 1.01 1.02 1.08 1.07 1.07 1.09
North Dakota 1.54 1.47 1.37 1.59 1.52 1.64 1.79 1.92 2.03 1.75
Ohio 0.94 0.96 0.96 0.97 0.97 0.99 1.04 1.03 1.02 1.02
Oklahoma 1.28 1.29 1.32 1.33 1.36 1.40 1.44 1.43 1.47 1.48
Oregon 0.95 0.95 0.95 0.94 0.97 0.98 0.98 1.01 1.00 1.00
Pennsylvania 1.01 1.05 1.04 1.05 1.05 1.06 1.08 1.08 1.08 1.08
Rhode Island 1.11 1.15 1.13 1.12 1.11 1.12 1.15 1.07 1.06 1.06
South Carolina 1.23 1.20 1.21 1.21 1.22 1.24 1.28 1.32 1.32 1.36
South Dakota 1.31 1.30 1.28 1.34 1.33 1.43 1.43 1.52 1.58 1.49
Tennessee 1.08 1.07 1.08 1.12 1.15 1.14 1.20 1.23 1.24 1.29
Texas 0.94 0.95 0.95 0.94 0.92 0.94 0.94 0.92 0.92 0.98
Utah 1.06 1.08 0.99 1.01 1.03 1.05 1.06 1.14 1.14 1.19
Vermont 0.95 1.03 1.04 1.01 1.03 1.07 1.09 1.11 1.11 1.14
Virginia 1.40 1.51 1.42 1.44 1.42 1.37 1.38 1.46 1.47 1.58
Washington 0.94 0.98 0.96 0.95 0.91 0.85 0.86 0.91 0.91 0.90
West Virginia 1.49 1.59 1.56 1.58 1.63 1.65 1.69 1.71 1.74 1.82
Wisconsin 0.82 0.80 0.81 0.84 0.86 0.88 0.91 0.90 0.87 0.84
Wyoming 1.03 1.08 1.03 1.03 1.06 1.06 1.06 1.10 1.04 1.13
District of Columbia $5.39 $5.39 $5.38 $5.21 $5.07 $5.30 $4.93 $5.40 $6.16 $6.59
                     
Source: Census Bureau; Tax Foundation's "State-by-State Tax Burden Allocation Model."
 

 

Ranking of States by Adjusted Federal Expenditures Per Dollar of Taxes
Over Time
Fiscal Years 1994-2003
State 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003
Alabama 10 8 9 8 8 9 7 7 7 6
Alaska 12 17 15 10 11 6 5 6 4 2
Arizona 20 21 21 22 23 21 21 24 22 21
Arkansas 16 16 17 15 14 13 12 11 9 13
California 32 38 38 37 39 41 45 42 41 43
Colorado 30 34 35 39 38 38 42 41 43 41
Connecticut 50 50 50 50 50 50 50 49 49 48
Delaware 43 41 42 43 43 37 39 40 40 40
Florida 27 24 23 23 27 28 28 31 34 32
Georgia 31 33 32 32 33 34 33 33 32 36
Hawaii 13 15 8 7 6 7 8 9 10 9
Idaho 19 20 19 19 18 19 19 17 15 18
Illinois 46 47 48 46 46 46 44 46 45 45
Indiana 41 42 40 38 35 35 34 34 35 35
Iowa 22 26 24 24 21 20 24 21 21 29
Kansas 24 28 28 27 24 24 29 23 25 25
Kentucky 18 13 13 13 9 14 14 14 13 10
Louisiana 8 7 12 14 16 11 11 13 14 14
Maine 7 9 11 11 12 15 17 18 18 16
Maryland 15 14 16 16 15 16 16 19 19 17
Massachusetts 33 39 39 40 40 40 46 45 44 44
Michigan 45 45 44 44 44 44 38 37 38 38
Minnesota 44 44 47 45 45 45 43 44 46 47
Mississippi 2 3 2 4 4 5 3 3 3 3
Missouri 9 12 6 17 17 18 18 16 17 19
Montana 5 6 4 5 3 2 6 5 6 7
Nebraska 26 30 30 28 28 25 23 22 23 30
Nevada 48 48 45 48 48 47 47 47 47 46
New Hampshire 47 46 46 47 47 48 48 48 48 49
New Jersey 49 49 49 49 49 49 49 50 50 50
New Mexico 1 1 1 1 1 1 1 1 2 1
New York 40 40 41 41 41 42 40 43 42 42
North Carolina 39 36 29 29 31 31 27 30 28 26
North Dakota 3 5 7 2 5 4 2 2 1 5
Ohio 38 32 33 33 32 32 32 32 31 31
Oklahoma 14 11 10 12 10 10 9 12 12 12
Oregon 35 35 36 35 34 33 35 35 33 33
Pennsylvania 29 27 25 25 26 27 26 28 27 27
Rhode Island 21 19 20 21 22 23 22 29 29 28
South Carolina 17 18 18 18 19 17 15 15 16 15
South Dakota 11 10 14 9 13 8 10 8 8 11
Tennessee 23 25 22 20 20 22 20 20 20 20
Texas 37 37 37 36 36 36 36 36 36 34
Utah 25 22 31 30 29 30 31 25 24 22
Vermont 34 29 26 31 30 26 25 26 26 23
Virginia 6 4 5 6 7 12 13 10 11 8
Washington 36 31 34 34 37 43 41 38 37 37
West Virginia 4 2 3 3 2 3 4 4 5 4
Wisconsin 42 43 43 42 42 39 37 39 39 39
Wyoming 28 23 27 26 25 29 30 27 30 24
                     
Source: Census Bureau; Tax Foundation's "State-by-State Tax Burden Allocation Model."