‘Donor states’ are ‘blue states’

March 23, 2006

The Tax Foundation released its most recent analysis of federal taxes paid by individual states, as compared to the federal revenue those same states received. The analysis asks the straightforward question: “Which States Gain Most from Federal Fiscal Operations? (.pdf)

Now, from a political and ideological perspective, “small government” types in states that tend to vote Republican are, of course, the same people who decry federal spending the most. I bet you can guess where I’m going with this.

It’s not exact, but the states that did the best are also states that voted Republican in 2004. The top 10, in order, are: New Mexico, Alaska, West Virginia, Mississippi, North Dakota, Alabama, Virginia, Hawaii, Montana, and South Dakota. For those counting at home, that’s nine “red” states out of 10.

As for the “donor states” that receive less than they give to the feds, the top 10 are: New Jersey, New Hampshire, Connecticut, Minnesota, Massachusetts, Nevada, Illinois, Delaware, Colorado, New York, and California. That’s eight “blue” states out of 10.

It’s a pretty interesting report, brought to my attention by Carpetbagger regular “Bubba.” Take a look.

No real surprise here. are greedy 😉

No, actually they have been in charge for five years plus, mostly. They are moving Federal funds where they want.

But you can’t blame Republicanites for West Virginia. That is all Senator Byrd’s doing.

  • No real surprise here. REPUBLICANITES are greedy.

    Cut when I should have copied. Sad, really.

  • And the way Nevada and Colorado are trending, by 2008 hopefully that will be ten blue states out of ten.

    To be fair, part of this is because more really wealthy people are concentrated in states like NY, CA and Connecticut. Of course, that also suggests a link between the relatively enlightened public policies of those states, and the relative prosperity of their residents.

  • Perhaps it is time to introduce the “Tax Equity Bill” again. The state that generates the tax will get the benefit of the dollars generated.

    Republicanites should love that! It could be easily sold to the Rubes (the folks who vote Republican.)

  • The same skewing can be found on a county-by-county basis in each individual state. The poorer counties with the shallowest economic bases are the most reliant upon governmnent funds to provide jobs and provide essential public services such as public safety and road maintenance. These poorer counties tend to be most strongly populated by Republicans who pride themselves on their toughness and independence, yet also scream the loudest that “somebody needs to do something” when they have a problem yet can’t come up with the money themselves to solve it.

  • Is this really an accurate assessment? What would it look like if total taxation were examined? I think you’ll find that the “donor” states have much higher tax rates across the board, and thus more state money to manage their needs. If these donor states were to cut their taxes in the same manner as the “red” states do, my guess is the disparities would even out.

  • Hey

    This report only deals with federal taxes. But maybe one of the reasons the (usually southern) “red” states need the extra fed money is because they have state tax rates that are insufficient to cover their “needs” (primarily due to chickenshit and dishonest politicians). The “donor” states have also apparently decided to provide various programs and services to their constituencies to avoid being the backward failures which are most of the “red” states. Yes, the “donor” states can cut their state taxes and digress to the low standards of the “red” states, but odds are their citizens will not let that happen. Nor their businesses. Funny how real economic development (at least with businesses that still choose to remain in the US) almost always choose the “donor” states over the rest of the states. I wonder why, well, not really–an overall educated work force, access to customers and vendors, solid governmental services and infrastructure, a better quality of life, all those things those slightly higher state taxes pay for.

  • Now just show a table comparing teen and out-of-wedlock pregnancies, divorce rates, education, alcoholic rates, and appearances on COPS, and we’ll contrast the “immoral, liberal blue states” to the “Heartland”.

  • bubba,

    looking at the expenditures table, I’m guessing that “procurement” is where the spending on defense related items (sans salary) is captured. Is this correct? If not, where does that money get accounted for?

    Assuming it is correct, is the “peace dividend” and welfare reform the main reason for California’s drop from just over a 1.00 ratio in 1994 to below 1.00 in 2004? If not, what else would account for it? Or is it only part of the equation with the other part being the growth in population in CA?

    many thanks in advance for thoughts on this. And thanks for the reference–interesting stuff.

  • I strongly disagree with the proposal to require federal spending be distributed among the states in proportion to the tax dollars generated by the states. To do so would go against principles of progressive taxation, where higher income people are taxed at higher rates. Given that the wealthy are concentrated in certain states like New York and California, we would expect and want these states to disproportionately bear the tax burden, so in and of itself it is not bad that some states are net gainers and losers with respect to federal dollars.
    That said, federal spending in many programs is not distributed fairly among the states. As a New Yorker, money for mass transit and homeland security instantly come to mind. Also, I suspect that low-tax states need more federal dollars spending because of state and local spending is deficient. In theory, this problem is addressed by taxpayers being able to deduct state and local taxes from their federal income tax, though this hardly seems adequate.
    But, the growth of the alternative minimum tax (AMT), which is greater in high-tax states, is taking away from large numbers of upper-middle and middle-income taxpayers this and most other deductions. This is probably the most profound “red” v. “blue” state tax issue. The Senate’s current version of tax reform includes extending capital gains tax cuts, which will benefit the very wealthy of all states, and not AMT reform, which would benefit those with five- and six-figure incomes, particularly in high-tax states. Given the orientation of the Bush era tax cuts, when it comes to tax policy, Republicans seem to care less about the people in their states and more about the wealthy of both red and blue states.

  • There’s a little thing mentioned by Eisenhower during his farewell address,”the industrial military complex.” The defence contractors have spread themselves out throughout the country with little enterprises in many states and congressional districts so that enough defence spending “pork” will cause a failed of worthless project to be approved. The war in Iraq is an outcropping of just that to a greater degree than one might imagine. Armies with a lot of new gadgets are always bucking to try them out on the real thing, see how many people they can kill with the push of a single button. Retired Gen. McAffery, MSNBC analysists said it all just before the attack with, “We’ll hit them with shock and awe.” He was sure those hi-tech weapons would bring the war to an end almost before it started. Now he’s as disillusioned as anyone. Ike warned us, the defence contractors are reaping a harvest of deficite dollars just like he said they would and he warned that would lead to war.

  • As another poster mentioned, this is also true within each state. For instance, here in Florida the tri-county area I live in (Dade-Broward-Palm Beach) provides much more revenue to the state coffers than the rest of the counties, and we often feel short-changed come budget time. Part of that, of course, is that the tri-county area is definitely Blue, and good ole Jeb don’t like that.

    There’s even a half-way serious movement to secede from the rest of the state and create our own state. Heh, when I lived in Seattle, the same situation was going on, only it was Western WA vs. Eastern WA.

  • Government spending is one of the biggest props to the economy there is. When the Federal government finally goes bankrupt in the near future, the South is going to revert back to an 1860 economy–without all that Federal spending, what else is there for them?

  • Say Openroadster…

    My tongue was firmly placed in my cheek as I was typing.

    My attempt was to use this as a Rube example of “fairness in taxation.”

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