High-tax state defenders have pretty much run out of ammunition. Clearly the lower tax states are doing better in job creation, business generating, business retention, cost-of-living, prosperity and net immigration standpoint. The one “fact” the lefties still love to post in desperation is the assertion that the high tax tax states subsidize the low tax states through the federal collection and distribution system. There’s a grain of truth in the assertion, but a ton of manure is added to give the factor its desired decaying aroma.
It’s time we took a closer look at this basic tenet of our progressive friends — using the two most compared states — Texas and California. This rebuttal may get a little wonky at times, but for the serious defender of the taxpayers, this is crucial stuff. Once you grasp the basic facts, you can just post the URL to this article. Rest assured that your opponents will not read it — let alone understand it.
Since most of you won’t read this semi-academic treatise, here’s my bottom line conclusion — destroying this bogus claim. EXCERPT:
California $7,691 $8,967
As I said, overall the low tax states get a bit more federal dollars (with numerous exceptions at both ends of the tax spectrum) than they pay in. But it’s a relatively minor economic factor when comparing states, for several reasons. But let’s start with the progressives’ Workers Paradise — California, and compare it with the progressives’ nemesis — Texas.
Liberals make a fundamental “mistake” over and over in their analysis of California’s performance and statistics — they compare state’s dollars while ignoring population. California has about ONE-EIGHTH of the entire nation’s population. Its population is 42.5% bigger than #2 Texas.
https://en.wikipedia.org/wiki/List_of_U.S._states_and_territories_by_population
Hence California going to be “the most” in many categories — starting with the widely ballyhooed “6th largest world’s economy.” As I’ve detailed in another blog article, if you adjust California’s GDP for population and cost of living, the Golden State is less prosperous than all but 13 of our 57 (or whatever) states.
Now, let’s look at money coming from the feds to California. Below is a good chart (the first of two) of the various categories of such money, and how much it all totals up to PER CAPITA. The chart is interactive at its Wikipedia source, but not so in this blog. So if you want to be able to rank all the states in order in each column, you’ll need to go to the source link. But the important category is the last one — the “Total” — and that’s the column I sorted on.
California does get somewhat less money per capita than the national average — the state is ranked 15th in money received per capita. California gets $8,967 per person from the federal government. The national average is $9,961 — about a $1,000 more — not exactly a game changer.
But it gets more interesting. the pitch by the California apologists is that it’s unfair to compare California’s high taxes with the low tax states — especially the low income tax states — because California suffers from this awful federal funding disadvantage.
Okaayyyy . . . . Let’s look at Texas — the state California liberals love to hate. Guess what? Texas, which has no state income tax, a lower sales tax, lower gas tax, lower property tax (a surprise to most) and much less expensive real estate, gets about the same per capita federal funding as California — a bit less, actually:
California $8,967.
Texas $8,865.
Moreover, there are two other zero income tax states with federal outlays less than California.
Wyoming $8,885
Nevada $8,308
In addition, there are four income tax free states which receive only modestly more federal spending than California — all receiving less than the national average:
New Hampshire $9.380
South Dakota $9,499
Florida $9,760
Tennessee $9,940
Indeed, only ONE of the eight states with zero income tax gets distributions higher than the national average — Alaska.
https://en.wikipedia.org/wiki/Federal_taxation_and_spending_by_state
Per capita federal spending, by state, federal fiscal 2013
| State | Retirement benefits | Nonretirement benefits | Grants | Contracts | Salaries and wages | Total |
|---|---|---|---|---|---|---|
| Utah | $2,446 | $1,740 | $1,212 | $771 | $939 | $7,108 |
| Minnesota | $3,112 | $2,354 | $1,670 | $562 | $477 | $8,174 |
| Illinois | $2,953 | $2,776 | $1,367 | $504 | $587 | $8,188 |
| Nevada | $3,116 | $2,448 | $975 | $1,033 | $735 | $8,308 |
| Wisconsin | $3,408 | $2,469 | $1,502 | $561 | $372 | $8,312 |
| Oregon | $3,653 | $2,669 | $1,149 | $286 | $568 | $8,324 |
| Nebraska | $3,335 | $2,301 | $1,359 | $518 | $855 | $8,368 |
| Iowa | $3,385 | $2,491 | $1,548 | $518 | $434 | $8,375 |
| Kansas | $3,405 | $2,511 | $652 | $594 | $1,214 | $8,377 |
| Indiana | $3,400 | $2,682 | $1,436 | $478 | $451 | $8,446 |
| Ohio | $3,394 | $2,868 | $1,402 | $541 | $573 | $8,778 |
| Georgia | $3,192 | $2,561 | $1,163 | $763 | $1,181 | $8,860 |
| Texas | $2,736 | $2,455 | $1,330 | $1,477 | $868 | $8,865 |
| Wyoming | $3,321 | $1,986 | $1,856 | $544 | $1,178 | $8,885 |
| California | $2,657 | $2,570 | $1,740 | $1,243 | $757 | $8,967 |
| Colorado | $3,041 | $2,068 | $1,346 | $1,521 | $1,261 | $9,237 |
| New Jersey | $3,208 | $3,106 | $1,730 | $724 | $511 | $9,279 |
| New Hampshire | $3,850 | $2,440 | $1,246 | $1,351 | $493 | $9,380 |
| Idaho | $3,375 | $2,251 | $1,474 | $1,597 | $693 | $9,390 |
| North Dakota | $3,062 | $2,072 | $2,165 | $678 | $1,430 | $9,407 |
| South Dakota | $3,507 | $2,348 | $1,844 | $669 | $1,131 | $9,499 |
| Michigan | $3,748 | $3,179 | $1,666 | $486 | $422 | $9,501 |
| North Carolina | $3,636 | $2,750 | $1,442 | $503 | $1,204 | $9,536 |
| Arkansas | $4,009 | $2,810 | $1,853 | $319 | $644 | $9,635 |
| Louisiana | $3,187 | $2,994 | $1,950 | $743 | $790 | $9,664 |
| Florida | $3,936 | $3,403 | $975 | $721 | $725 | $9,760 |
| Delaware | $3,967 | $2,882 | $1,882 | $294 | $748 | $9,773 |
| Oklahoma | $3,793 | $2,636 | $1,662 | $528 | $1,212 | $9,830 |
| Tennessee | $3,742 | $2,938 | $1,444 | $1,176 | $631 | $9,930 |
| New York | $3,113 | $3,046 | $2,690 | $547 | $544 | $9,940 |
| United States | $3,357 | $2,752 | $1,602 | $1,288 | $962 | $9,961 |
| Montana | $3,874 | $2,356 | $2,238 | $436 | $1,092 | $9,996 |
| Arizona | $3,374 | $2,756 | $1,367 | $1,864 | $796 | $10,157 |
| South Carolina | $4,060 | $2,856 | $1,193 | $1,139 | $968 | $10,217 |
| Washington | $3,522 | $2,394 | $1,512 | $1,683 | $1,351 | $10,462 |
| Pennsylvania | $3,825 | $3,158 | $1,714 | $1,267 | $603 | $10,568 |
| Missouri | $3,674 | $2,749 | $1,914 | $1,643 | $850 | $10,829 |
| Kentucky | $3,814 | $2,958 | $1,502 | $1,464 | $1,188 | $10,927 |
| Rhode Island | $3,632 | $3,252 | $2,292 | $729 | $1,078 | $10,984 |
| Vermont | $3,764 | $2,760 | $3,013 | $628 | $871 | $11,036 |
| Massachusetts | $3,160 | $3,107 | $2,247 | $2,177 | $609 | $11,300 |
| Mississippi | $3,722 | $3,181 | $1,723 | $1,934 | $909 | $11,469 |
| West Virginia | $4,576 | $3,158 | $2,153 | $622 | $988 | $11,496 |
| Connecticut | $3,238 | $2,927 | $1,960 | $2,892 | $509 | $11,527 |
| Alabama | $4,329 | $3,033 | $1,273 | $2,000 | $1,108 | $11,743 |
| Maine | $4,223 | $2,993 | $2,399 | $1,565 | $924 | $12,104 |
| New Mexico | $3,697 | $2,624 | $2,249 | $3,211 | $1,432 | $13,213 |
| Hawaii | $3,801 | $2,453 | $2,052 | $1,351 | $4,095 | $13,752 |
| Alaska | $2,820 | $2,162 | $3,604 | $2,215 | $3,575 | $14,375 |
| Maryland | $4,004 | $2,552 | $1,678 | $4,318 | $3,132 | $15,684 |
| Virginia | $4,203 | $2,168 | $1,099 | $6,197 | $3,043 | $16,710 |
| District of Columbia | $4,820 | $2,887 | $7,678 | $25,963 | $32,572 | $73,920 |
Now, the more fiscally astute among you will note that the other half of the equation is missing — the amount paid INTO the federal treasure per capita by state. Patience, grasshoppers.
Here’s the table for that factor:
https://en.wikipedia.org/wiki/Federal_tax_revenue_by_state
Federal tax revenue by state
Fiscal Year 2012
| Rank | State | Gross collections | Revenue per capita (est.) | Ratio to GSP[3] |
|---|---|---|---|---|
| District of Columbia[4] | $20,747,652,000 | $32,811.79 | 18.9% | |
| 30 | Delaware | $21,835,412,000 | $23,809.40 | 33.1% |
| 10 | Minnesota | $78,685,402,000 | $14,627.88 | 26.7% |
| 19 | Connecticut | $47,262,702,000 | $13,163.83 | 20.6% |
| 6 | New Jersey | $111,377,490,000 | $12,564.31 | 21.9% |
| 9 | Massachusetts | $79,826,976,000 | $12,011.02 | 19.8% |
| 32 | Nebraska | $19,795,254,000 | $10,668.28 | 19.9% |
| 37 | Rhode Island | $10,992,338,000 | $10,465.98 | 21.6% |
| 3 | New York | $201,167,954,000 | $10,279.27 | 16.7% |
| 4 | Illinois | $124,431,227,000 | $9,664.37 | 17.9% |
| 7 | Ohio | $111,094,276,000 | $9,623.36 | 21.8% |
| 26 | Arkansas | $25,299,832,000 | $8,578.74 | 23.1% |
| 8 | Pennsylvania | $108,961,515,000 | $8,536.94 | 18.1% |
| 2 | Texas | $219,459,878,000 | $8,421.59 | 15.7% |
| 18 | Maryland | $48,107,002,000 | $8,175.12 | 15.1% |
| 45 | North Dakota | $5,664,860,000 | $8,096.96 | 12.3% |
| 17 | Missouri | $48,413,247,000 | $8,039.41 | 18.7% |
| 22 | Colorado | $41,252,701,000 | $7,952.20 | 15.1% |
| 12 | Virginia | $64,297,400,000 | $7,854.68 | 14.4% |
| 16 | Indiana | $51,238,512,000 | $7,837.83 | 17.2% |
| 1 | California | $292,563,574,000 | $7,690.66 | 14.6% |
| 15 | Washington | $52,443,862,000 | $7,603.85 | 14.0% |
| 29 | Kansas | $21,904,615,000 | $7,590.21 | 15.8% |
| 24 | Louisiana | $34,811,072,000 | $7,564.51 | 14.3% |
| 20 | Tennessee | $47,010,303,000 | $7,281.37 | 17.0% |
| 21 | Wisconsin | $41,498,033,000 | $7,246.80 | 15.9% |
| 25 | Oklahoma | $27,087,264,000 | $7,100.54 | 16.8% |
| 47 | Alaska | $4,898,780,000 | $6,697.36 | 9.4% |
| 39 | New Hampshire | $8,807,691,000 | $6,668.87 | 13.6% |
| 49 | Wyoming | $3,828,379,000 | $6,641.74 | 10.0% |
| 11 | Georgia | $65,498,308,000 | $6,602.69 | 15.1% |
| 5 | Florida | $122,249,635,000 | $6,328.42 | 15.7% |
| 13 | North Carolina | $61,600,064,000 | $6,316.61 | 13.5% |
| 46 | South Dakota | $5,136,249,000 | $6,163.35 | 12.1% |
| 33 | Iowa | $18,753,596,000 | $6,100.35 | 12.3% |
| 14 | Michigan | $59,210,158,000 | $5,990.89 | 14.8% |
| 28 | Oregon | $22,716,602,000 | $5,825.74 | 11.4% |
| 27 | Kentucky | $25,085,813,000 | $5,726.81 | 14.5% |
| 50 | Vermont | $3,524,887,000 | $5,630.71 | 12.9% |
| 35 | Utah | $15,642,129,000 | $5,478.30 | 12.0% |
| 23 | Arizona | $34,850,436,000 | $5,318.03 | 13.1% |
| 36 | Nevada | $13,727,425,000 | $4,975.63 | 10.3% |
| 41 | Idaho | $7,622,490,000 | $4,776.81 | 13.1% |
| 44 | Maine | $6,229,189,000 | $4,686.45 | 11.6% |
| 42 | Hawaii | $6,511,578,000 | $4,676.81 | 9.0% |
| 48 | Montana | $4,383,727,000 | $4,361.31 | 10.8% |
| 31 | Alabama | $20,882,949,000 | $4,330.74 | 11.4% |
| 34 | South Carolina | $18,557,166,000 | $3,928.50 | 10.5% |
| 40 | New Mexico | $7,866,206,000 | $3,771.79 | 9.8% |
| 38 | Mississippi | $10,458,549,000 | $3,503.79 | 10.3% |
| 43 | West Virginia | $6,498,502,000 | $3,502.46 | 9.4% |
| Puerto Rico[5] | $3,067,234,000 | $836.42 | N/A | |
| TOTAL[6] | $2,514,838,095,000 | 7,918.73 (US Avg.) | 16.1% |
So, let’s compare the full equation for California and Texas — and for the national average (all per capita paid per year):
*****************Paid to Feds**********Received from Feds
California $7,691 $8,967
Texas $8,537 $8,865
Nat’l Average $7,918 $9,961
BOTTOM LINE: California paid LESS to the feds per capita than Texas. California got MORE back from the feds than Texas.
—
Now, that wasn’t so wonky, was it?
Here’s comes the (sorta) wonky part — junior high math applied to state budgets. It exposes the dishonesty and/or the innumeracy of the Big Government apologists. Trust me — if you’ve read this far, it’s well within your skill set.
The left loves to point out that low tax state government budgets have a higher percent of federal funding than high tax state budgets. And they are correct! But it turns out that it’s not the result of some federal discrimination or unfairness.
If a state has high taxes, then a larger portion of their bloated budget is paid by those taxes — it does NOT reduce the federal payments! Simple example:
A state has a $50 billion budget, with the feds providing $20 billion of that $50 billion. That’s 40% provided by the feds. The next year that state raises taxes and doubles its budget to $100 billion (usually to primarily benefit public employees). The federal contribution is still $20 billion. By the left’s “analysis,” this spendthrift state is being shortchanged by the federal government, as now the feds are paying only 20% of the state budget — supposedly the feds should still be paying 40%!
Sadly, it’s not just the left that uses this misrepresentation. The usually pro-taxpayer Tax Foundation blundered badly by making this same mistake in a study they did. They should be embarrassed.
http://taxfoundation.org/blog/which-states-rely-most-federal-aid-0
One final point. The differences in federal spending in states does exist, but it’s not that big a factor in a state’s economy. Federal spending IS a factor, but the DIFFERENCES in federal spending between states is not that significant. It’s much ado about nothing, when comparing tax policies among the states. But then, what else can liberal apologists do to defend their failing high state tax policies?
So the next time you see a comment from the left about how unfairly federal money coming back to states is distributed, use this article to kick their intellectual butts with a factual response.