The Tax Foundation

March 16, 2006

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

New Mexico gets $2 for every dollar in taxes, New Jersey only 55 cents

For immediate release
Media Contact: William Ahern (202) 464-5101

WASHINGTON, D.C.—Federal tax and spending splits the nation between “donor states” and “beneficiary states,” according to the Tax Foundation’s annual analysis of federal taxing and spending patterns. (Click here to read the full study.)

In Fiscal Year 2004, the most recent year for this data, New Mexico was the biggest beneficiary, getting $2 back in spending for every tax dollar. New Jersey taxpayers were the most generous, sending $1 to Washington for just 55 cents in spending.

“The main culprit is not lazy congressmen who don’t bring home enough pork, but rather the progressive income tax,” said Tax Foundation President Scott Hodge.

High-income people who pay income tax at the highest rates -- currently 25%, 28%, 33% and 35% -- are far more numerous in the donor states. But in states where average earnings are lower, a greater percentage of tax is paid at the 10% and 15% rates.

How much would Congress have to spend in New Jersey before it got New Mexico’s sweet deal -- $2 back for every $1 it paid in federal taxes? “The answer is an impossible amount,” said Hodge, “more than a third of what the nation spends on military defense. The only hope for rapid improvement in New Jersey’s ratio would be a fundamental tax reform that flattened federal income tax rates.”

States That Benefit
During fiscal 2004, taxpayers in New Mexico benefited the most from the give-and-take with Uncle Sam, receiving $2.00 in federal outlays for every $1.00 the state’s taxpayers sent to Washington. Other states whose modest tax payments produced favorable spending-to-tax ratios were Alaska ($1.87), West Virginia ($1.83) and Mississippi ($1.77).

States That Help Others
If some states are beneficiaries, then naturally some must be benefactors.

Combining the second highest tax burden per capita with the fourth lowest federal spending per capita, New Jersey had the lowest federal spending-to-tax ratio (55¢). Other states that had low federal spending-to-tax ratios in FY 2004 are Connecticut (66¢), New Hampshire (67¢), Minnesota (69¢) and Illinois (73¢).

Changing Ranks
The state that raised its ratio the most between 1994 and 2004 is Alaska where federal spending rose from $1.30 to $1.87 for each dollar in taxes. This 57-cent increase beats out Alabama, where federal spending increased 36¢ per dollar of tax, West Virginia (34¢ more spending per dollar), and Hawaii (31¢ more).

States where the ratio dropped most are Colorado, Massachusetts and California. Colorado’s ratio fell 21¢ from $1.00 in FY 1994 to 80¢ in FY 2004. Massachusetts’s has dropped 20, and California’s 19¢.

Red State, Blue State?
The correlation between donor states and so-called blue states is fairly strong: 13 of the 19 states that Senator Kerry won in 2004 sent more to Washington in taxes than they got back in spending.

Meanwhile, most of the so-called red states profit from federal taxing and spending: 25 of the 31 states President Bush won. “They pay their taxes too,” said Tax Foundation President Scott Hodge, “but those payments are not as high because of the progressive income tax.”

The study is No. 139 in the Tax Foundation Special Report series, titled “Federal Tax Burdens and Expenditures by State,” by Foundation economist Curtis Dubay. Using new Fiscal Year 2004 spending data from the Census Bureau’s annual Consolidated Federal Funds Report, Dubay has compared the federal tax burden in each state with the amount of federal spending in each state. The result is a ranking of which states got the best deal in 2004 from Uncle Sam’s tax and spending policies.

Best known for its annual calculation of Tax Freedom Day ®, the Tax Foundation is a nonpartisan, nonprofit organization that has monitored fiscal policy at the federal, state and local levels since 1937

Table 1. Adjusted Ratios of Federal Expenditures to Taxes* by State with Ranking

Fiscal Years 1994 and 2004

State

Spending Per Dollar of Tax

Change in Spending Per Dollar of Tax

Ranking

Change

in State

Rank

FY 1994

FY 2004

FY 1994

FY 2004

Alabama

$ 1.34

$ 1.71

$ 0.36

10

6

-4

Alaska

$ 1.30

$ 1.87

$ 0.57

12

2

-10

Arizona

$ 1.11

$ 1.30

$ 0.19

20

19

-1

Arkansas

$ 1.24

$ 1.47

$ 0.23

16

12

-4

California

$ 0.98

$ 0.79

-$ 0.19

32

43

11

Colorado

$ 1.00

$ 0.79

-$ 0.21

30

41

11

Connecticut

$ 0.67

$ 0.66

$ 0.00

50

49

-1

Delaware

$ 0.79

$ 0.79

$ 0.00

43

40

-3

Florida

$ 1.06

$ 1.02

-$ 0.03

27

30

3

Georgia

$ 0.99

$ 0.96

-$ 0.03

31

35

4

Hawaii

$ 1.29

$ 1.60

$ 0.31

13

8

-5

Idaho

$ 1.12

$ 1.28

$ 0.16

19

21

2

Illinois

$ 0.74

$ 0.73

-$ 0.01

46

46

0

Indiana

$ 0.82

$ 0.97

$ 0.15

41

33

-8

Iowa

$ 1.10

$ 1.11

$ 0.02

22

25

3

Kansas

$ 1.07

$ 1.12

$ 0.06

24

23

-1

Kentucky

$ 1.20

$ 1.45

$ 0.25

18

14

-4

Louisiana

$ 1.35

$ 1.45

$ 0.11

8

13

5

Maine

$ 1.35

$ 1.40

$ 0.04

7

16

9

Maryland

$ 1.27

$ 1.44

$ 0.17

15

15

0

Massachusetts

$ 0.97

$ 0.77

-$ 0.20

33

44

11

Michigan

$ 0.79

$ 0.85

$ 0.06

45

38

-7

Minnesota

$ 0.79

$ 0.69

-$ 0.10

44

47

3

Mississippi

$ 1.61

$ 1.77

$ 0.16

2

4

2

Missouri

$ 1.34

$ 1.29

-$ 0.05

9

20

11

Montana

$ 1.43

$ 1.58

$ 0.15

5

9

4

Nebraska

$ 1.06

$ 1.07

$ 0.01

26

28

2

Nevada

$ 0.71

$ 0.73

$ 0.02

48

45

-3

New Hampshire

$ 0.73

$ 0.67

-$ 0.07

47

48

1

New Jersey

$ 0.69

$ 0.55

-$ 0.13

49

50

1

New Mexico

$ 1.88

$ 2.00

$ 0.12

1

1

0

New York

$ 0.85

$ 0.79

-$ 0.06

40

42

2

North Carolina

$ 0.93

$ 1.10

$ 0.16

39

27

-12

North Dakota

$ 1.54

$ 1.73

$ 0.18

3

5

2

Ohio

$ 0.94

$ 1.01

$ 0.07

38

32

-6

Oklahoma

$ 1.28

$ 1.48

$ 0.20

14

11

-3

Oregon

$ 0.95

$ 0.97

$ 0.02

35

34

-1

Pennsylvania

$ 1.01

$ 1.06

$ 0.06

29

29

0

Rhode Island

$ 1.11

$ 1.02

-$ 0.09

21

31

10

South Carolina

$ 1.23

$ 1.38

$ 0.15

17

17

0

South Dakota

$ 1.31

$ 1.49

$ 0.18

11

10

-1

Tennessee

$ 1.08

$ 1.30

$ 0.23

23

18

-5

Texas

$ 0.94

$ 0.94

$ 0.00

37

36

-1

Utah

$ 1.06

$ 1.14

$ 0.08

25

22

-3

Vermont

$ 0.95

$ 1.12

$ 0.17

34

24

-10

Virginia

$ 1.40

$ 1.66

$ 0.26

6

7

1

Washington

$ 0.94

$ 0.88

-$ 0.06

36

37

1

West Virginia

$ 1.49

$ 1.83

$ 0.34

4

3

-1

Wisconsin

$ 0.82

$ 0.82

$ 0.00

42

39

-3

Wyoming

$ 1.03

$ 1.11

$ 0.07

28

26

-2

Dist. of Columbia

$ 5.39

$ 6.64

$ 1.25

-

-

-

Source: Census Bureau, Tax Foundation

* Deficits are considered future tax liabilities moved to the current year.

 

Table 2. Adjusted Ratios of Federal Expenditures to Taxes by State*, Fiscal Years 1994-2004

State

1994

1995

1996

1997

1998

1999

2000

2001

2002

2003

2004

Alabama

$ 1.34

$ 1.31

$ 1.33

$ 1.37

$ 1.39

$ 1.42

$ 1.50

$ 1.54

$ 1.56

$ 1.68

$ 1.71

Alaska

$ 1.30

$ 1.21

$ 1.27

$ 1.34

$ 1.36

$ 1.48

$ 1.58

$ 1.57

$ 1.74

$ 1.84

$ 1.87

Arizona

$ 1.11

$ 1.13

$ 1.11

$ 1.08

$ 1.10

$ 1.16

$ 1.18

$ 1.14

$ 1.20

$ 1.24

$ 1.30

Arkansas

$ 1.24

$ 1.22

$ 1.24

$ 1.30

$ 1.31

$ 1.33

$ 1.39

$ 1.46

$ 1.51

$ 1.45

$ 1.47

California

$ 0.98

$ 0.94

$ 0.93

$ 0.92

$ 0.90

$ 0.87

$ 0.81

$ 0.81

$ 0.81

$ 0.79

$ 0.79

Colorado

$ 1.00

$ 0.95

$ 0.96

$ 0.91

$ 0.91

$ 0.88

$ 0.84

$ 0.82

$ 0.81

$ 0.81

$ 0.79

Connecticut

$ 0.67

$ 0.68

$ 0.69

$ 0.67

$ 0.70

$ 0.69

$ 0.66

$ 0.67

$ 0.66

$ 0.66

$ 0.66

Delaware

$ 0.79

$ 0.84

$ 0.85

$ 0.84

$ 0.85

$ 0.90

$ 0.88

$ 0.85

$ 0.81

$ 0.82

$ 0.79

Florida

$ 1.06

$ 1.07

$ 1.08

$ 1.07

$ 1.05

$ 1.06

$ 1.07

$ 1.04

$ 1.00

$ 1.01

$ 1.02

Georgia

$ 0.99

$ 0.96

$ 0.97

$ 0.97

$ 0.97

$ 0.97

$ 0.99

$ 1.02

$ 1.02

$ 0.96

$ 0.96

Hawaii

$ 1.29

$ 1.26

$ 1.37

$ 1.40

$ 1.47

$ 1.47

$ 1.45

$ 1.48

$ 1.48

$ 1.56

$ 1.60

Idaho

$ 1.12

$ 1.14

$ 1.15

$ 1.16

$ 1.22

$ 1.20

$ 1.22

$ 1.27

$ 1.32

$ 1.30

$ 1.28

Illinois

$ 0.74

$ 0.74

$ 0.75

$ 0.77

$ 0.78

$ 0.79

$ 0.81

$ 0.80

$ 0.77

$ 0.72

$ 0.73

Indiana

$ 0.82

$ 0.84

$ 0.89

$ 0.92

$ 0.93

$ 0.95

$ 0.99

$ 1.01

$ 0.98

$ 0.95

$ 0.97

Iowa

$ 1.10

$ 1.06

$ 1.08

$ 1.06

$ 1.12

$ 1.17

$ 1.11

$ 1.21

$ 1.21

$ 1.05

$ 1.11

Kansas

$ 1.07

$ 1.05

$ 1.03

$ 1.02

$ 1.07

$ 1.11

$ 1.07

$ 1.16

$ 1.13

$ 1.12

$ 1.12

Kentucky

$ 1.20

$ 1.28

$ 1.28

$ 1.33

$ 1.36

$ 1.32

$ 1.38

$ 1.38

$ 1.44

$ 1.51

$ 1.45

Louisiana

$ 1.35

$ 1.35

$ 1.28

$ 1.31

$ 1.27

$ 1.37

$ 1.41

$ 1.42

$ 1.44

$ 1.47

$ 1.45

Maine

$ 1.35

$ 1.31

$ 1.32

$ 1.33

$ 1.34

$ 1.31

$ 1.27

$ 1.24

$ 1.31

$ 1.35

$ 1.40

Maryland

$ 1.27

$ 1.27

$ 1.25

$ 1.24

$ 1.30

$ 1.28

$ 1.27

$ 1.24

$ 1.29

$ 1.34

$ 1.44

Massachusetts

$ 0.97

$ 0.92

$ 0.91

$ 0.90

$ 0.88

$ 0.87

$ 0.80

$ 0.80

$ 0.81

$ 0.79

$ 0.77

Michigan

$ 0.79

$ 0.77

$ 0.78

$ 0.82

$ 0.83

$ 0.85

$ 0.88

$ 0.91

$ 0.88

$ 0.84

$ 0.85

Minnesota

$ 0.79

$ 0.78

$ 0.76

$ 0.80

$ 0.81

$ 0.83

$ 0.84

$ 0.81

$ 0.77

$ 0.70

$ 0.69

Mississippi

$ 1.61

$ 1.54

$ 1.61

$ 1.56

$ 1.53

$ 1.60

$ 1.72

$ 1.81

$ 1.83

$ 1.82

$ 1.77

Missouri

$ 1.34

$ 1.29

$ 1.40

$ 1.24

$ 1.24

$ 1.24

$ 1.26

$ 1.29

$ 1.32

$ 1.31

$ 1.29

Montana

$ 1.43

$ 1.46

$ 1.48

$ 1.54

$ 1.55

$ 1.71

$ 1.56

$ 1.62

$ 1.59

$ 1.58

$ 1.58

Nebraska

$ 1.06

$ 1.01

$ 1.00

$ 1.02

$ 1.05

$ 1.08

$ 1.14

$ 1.19

$ 1.20

$ 1.06

$ 1.07

Nevada

$ 0.71

$ 0.73

$ 0.78

$ 0.73

$ 0.75

$ 0.75

$ 0.77

$ 0.76

$ 0.72

$ 0.70

$ 0.73

New Hampshire

$ 0.73

$ 0.75

$ 0.76

$ 0.74

$ 0.76

$ 0.73

$ 0.72

$ 0.71

$ 0.69

$ 0.65

$ 0.67

New Jersey

$ 0.69

$ 0.68

$ 0.69

$ 0.71

$ 0.71

$ 0.70

$ 0.70

$ 0.66

$ 0.61

$ 0.57

$ 0.55

New Mexico

$ 1.88

$ 1.86

$ 1.85

$ 1.84

$ 1.85

$ 1.88

$ 2.08

$ 1.93

$ 2.02

$ 2.04

$ 2.00

New York

$ 0.85

$ 0.87

$ 0.86

$ 0.87

$ 0.87

$ 0.86

$ 0.87

$ 0.81

$ 0.82

$ 0.80

$ 0.79

North Carolina

$ 0.93

$ 0.95

$ 1.01

$ 1.01

$ 1.01

$ 1.02

$ 1.08

$ 1.07

$ 1.06

$ 1.08

$ 1.10

North Dakota

$ 1.54

$ 1.47

$ 1.37

$ 1.59

$ 1.52

$ 1.64

$ 1.79

$ 1.92

$ 1.97

$ 1.72

$ 1.73

Ohio

$ 0.94

$ 0.96

$ 0.96

$ 0.97

$ 0.97

$ 0.99

$ 1.04

$ 1.03

$ 1.00

$ 1.01

$ 1.01

Oklahoma

$ 1.28

$ 1.29

$ 1.32

$ 1.33

$ 1.36

$ 1.40

$ 1.44

$ 1.43

$ 1.48

$ 1.48

$ 1.48

Oregon

$ 0.95

$ 0.95

$ 0.95

$ 0.94

$ 0.97

$ 0.98

$ 0.98

$ 1.01

$ 0.98

$ 0.99

$ 0.97

Pennsylvania

$ 1.01

$ 1.05

$ 1.04

$ 1.05

$ 1.05

$ 1.06

$ 1.08

$ 1.08

$ 1.07

$ 1.07

$ 1.06

Rhode Island

$ 1.11

$ 1.15

$ 1.13

$ 1.12

$ 1.11

$ 1.12

$ 1.15

$ 1.07

$ 1.05

$ 1.06

$ 1.02

South Carolina

$ 1.23

$ 1.20

$ 1.21

$ 1.21

$ 1.22

$ 1.24

$ 1.28

$ 1.32

$ 1.31

$ 1.35

$ 1.38

South Dakota

$ 1.31

$ 1.30

$ 1.28

$ 1.34

$ 1.33

$ 1.43

$ 1.43

$ 1.52

$ 1.60

$ 1.49

$ 1.49

Tennessee

$ 1.08

$ 1.07

$ 1.08

$ 1.12

$ 1.15

$ 1.14

$ 1.20

$ 1.23

$ 1.22

$ 1.28

$ 1.30

Texas

$ 0.94

$ 0.95

$ 0.95

$ 0.94

$ 0.92

$ 0.94

$ 0.94

$ 0.92

$ 0.93

$ 0.99

$ 0.94

Utah

$ 1.06

$ 1.08

$ 0.99

$ 1.01

$ 1.03

$ 1.05

$ 1.06

$ 1.14

$ 1.12

$ 1.18

$ 1.14

Vermont

$ 0.95

$ 1.03

$ 1.04

$ 1.01

$ 1.03

$ 1.07

$ 1.09

$ 1.11

$ 1.11

$ 1.13

$ 1.12

Virginia

$ 1.40

$ 1.51

$ 1.42

$ 1.44

$ 1.42

$ 1.37

$ 1.38

$ 1.46

$ 1.44

$ 1.58

$ 1.66

Washington

$ 0.94

$ 0.98

$ 0.96

$ 0.95

$ 0.91

$ 0.85

$ 0.86

$ 0.91

$ 0.90

$ 0.90

$ 0.88

West Virginia

$ 1.49

$ 1.59

$ 1.56

$ 1.58

$ 1.63

$ 1.65

$ 1.69

$ 1.71

$ 1.67

$ 1.76

$ 1.83

Wisconsin

$ 0.82

$ 0.80

$ 0.81

$ 0.84

$ 0.86

$ 0.88

$ 0.91

$ 0.90

$ 0.86

$ 0.83

$ 0.82

Wyoming

$ 1.03

$ 1.08

$ 1.03

$ 1.03

$ 1.06

$ 1.06

$ 1.06

$ 1.10

$ 1.07

$ 1.14

$ 1.11

Dist. of Columbia

$ 5.39

$ 5.39

$ 5.38

$ 5.21

$ 5.07

$ 5.30

$ 4.93

$ 5.40

$ 6.02

$ 6.52

$ 6.64

Source: Census Bureau, Tax Foundation

* Deficits are considered future tax liabilities moved to the current year.

 

Table 3. Ranking of Adjusted Ratios of Federal Expenditures to Taxes by State*, Fiscal Years 1994-2004

State

1994

1995

1996

1997

1998

1999

2000

2001

2002

2003

2004

Alabama

10

8

9

8

8

9

7

7

8

6

6

Alaska

12

17

15

10

11

6

5

6

4

2

2

Arizona

20

21

21

22

23

21

21

24

22

21

19

Arkansas

16

16

17

15

14

13

12

11

9

14

12

California

32

38

38

37

39

41

45

42

41

44

43

Colorado

30

34

35

39

38

38

42

41

42

41

41

Connecticut

50

50

50

50

50

50

50

49

49

48

49

Delaware

43

41

42

43

43

37

39

40

44

40

40

Florida

27

24

23

23

27

28

28

31

33

32

30

Georgia

31

33

32

32

33

34

33

33

31

35

35

Hawaii

13

15

8

7

6

7

8

9

10

9

8

Idaho

19

20

19

19

18

19

19

17

15

19

21

Illinois

46

47

48

46

46

46

44

46

45

45

46

Indiana

41

42

40

38

35

35

34

34

34

36

33

Iowa

22

26

24

24

21

20

24

21

21

30

25

Kansas

24

28

28

27

24

24

29

23

24

25

23

Kentucky

18

13

13

13

9

14

14

14

13

10

14

Louisiana

8

7

12

14

16

11

11

13

14

13

13

Maine

7

9

11

11

12

15

17

18

17

16

16

Maryland

15

14

16

16

15

16

16

19

19

17

15

Massachusetts

33

39

39

40

40

40

46

45

43

43

44

Michigan

45

45

44

44

44

44

38

37

38

38

38

Minnesota

44

44

47

45

45

45

43

44

46

47

47

Mississippi

2

3

2

4

4

5

3

3

3

3

4

Missouri

9

12

6

17

17

18

18

16

16

18

20

Montana

5

6

4

5

3

2

6

5

7

8

9

Nebraska

26

30

30

28

28

25

23

22

23

28

28

Nevada

48

48

45

48

48

47

47

47

47

46

45

New Hampshire

47

46

46

47

47

48

48

48

48

49

48

New Jersey

49

49

49

49

49

49

49

50

50

50

50

New Mexico

1

1

1

1

1

1

1

1

1

1

1

New York

40

40

41

41

41

42

40

43

40

42

42

North Carolina

39

36

29

29

31

31

27

30

29

26

27

North Dakota

3

5

7

2

5

4

2

2

2

5

5

Ohio

38

32

33

33

32

32

32

32

32

31

32

Oklahoma

14

11

10

12

10

10

9

12

11

12

11

Oregon

35

35

36

35

34

33

35

35

35

34

34

Pennsylvania

29

27

25

25

26

27

26

28

28

27

29

Rhode Island

21

19

20

21

22

23

22

29

30

29

31

South Carolina

17

18

18

18

19

17

15

15

18

15

17

South Dakota

11

10

14

9

13

8

10

8

6

11

10

Tennessee

23

25

22

20

20

22

20

20

20

20

18

Texas

37

37

37

36

36

36

36

36

36

33

36

Utah

25

22

31

30

29

30

31

25

25

22

22

Vermont

34

29

26

31

30

26

25

26

26

24

24

Virginia

6

4

5

6

7

12

13

10

12

7

7

Washington

36

31

34

34

37

43

41

38

37

37

37

West Virginia

4

2

3

3

2

3

4

4

5

4

3

Wisconsin

42

43

43

42

42

39

37

39

39

39

39

Wyoming

28

23

27

26

25

29

30

27

27

23

26

Dist. of Columbia

10

8

9

8

8

9

7

7

8

6

6

Source: Census Bureau, Tax Foundation

* Deficits are considered future tax liabilities moved to the current year.

(Click here to read the full study.)

(For more information please contact William Ahern at (202) 464-5101.)