United States Capitol

In the course of collecting taxes and spending money, the federal government inevitably creates “winners” and “losers” across the American landscape.  Our friends at Key Policy Data have determined whether or not your state is economically helped or hindered by Uncle Sam.

For example, a rural area with a large military base will receive far more federal dollars in military salaries and wages and purchases from local suppliers than they will pay in federal taxes.  Such areas would be deemed a “net receiver” of money from Uncle Sam.

More subtly, an area may be subject to high levels of federal taxation that makes it difficult to receive more than they pay.  For example, because the federal income tax code is significantly progressive (meaning tax rates rise with income), high cost-of-living areas such as New York City or Chicago pay a disproportionate amount in taxes.  Such areas would be deemed a “net payer” of money to Uncle Sam.

The results of their analysis are expressed as a ratio in terms of how much spending is received for every dollar that is sent to Washington, D.C.  Under current policies, more states benefit but more people lose from federal fiscal policy.

Table 1 shows the federal tax burdens to spending ratios for every state for fiscal year 2013.  Overall, there are 29 states that receive more in federal spending than they pay in federal taxes representing 155 million people.  The top five winning states being: Kentucky ($1.75), Mississippi ($1.74), New Mexico ($1.69), Hawaii ($1.61), and West Virginia ($1.58).  Economically, these states are getting a financial boost from Uncle Sam.

Table 1 Federal Tax Burden and Spending Ratios by State Fiscal Year 2013On the other hand, there are 21 states that pay more in federal taxes than they receive in federal spending representing 161 million people.  The top five losing states being: New Jersey ($0.65), Illinois ($0.74), Minnesota ($0.77), New York ($0.78), and New Hampshire ($0.79).  Economically, these states are experiencing a financial drain from Uncle Sam.

This analysis clearly shows that Uncle Sam’s tax and spending policies do have a disparate geographic impact creating “winners” and “losers” across America’s landscape.  Of course, this brings to light as to whether or not America’s federalist system was designed to redistribute income and wealth over state lines?  Nonetheless, philosophical debates aside, Uncle Sam’s actions do economically impact your state in a significant way.

The video below shows the federal tax and spending ratios by state over time. Additionally, you can use their unique web app that breaks down their analysis by type of spending/taxes as well as down to the county-level.

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