The States That Give and Get the Most From the Federal Government

Several weeks ago, we asked where federal spending goes. In addition to the traditional fiscal budget categories, we said age, geography, and politics had some answers.

But there is more.

Federal Spending and Taxes

California, Massachusetts, Washington, New Jersey, and New York top the list of states that send more money to the federal government than they receive. On a per person basis, for Massachusetts, we are looking at individuals giving almost $5,000 more than they get:Meanwhile, Virginia, Maryland, Kentucky, Ohio, and North Carolina are the top receivers of federal funds.

In dollar terms, the balance of payments range from California’s negative $72 billion to Virginia’s plus $129.2 billion:

Asking why some states get more and others less, we would see that states with higher poverty rates get more Medicaid and SNAP (supplemental nutrition) payments. As we have seen, age can attract more revenue to states through Medicare. But also, we are looking at states like Kentucky that receive revenue through defense contractors. And, as we might expect, the places with the most federal employees like Virginia and Maryland, get wages from the federal government.

In both maps (below), darker shading indicates higher amounts:

By contrast, taxes come from the most affluent states with the high earners that pay more taxes. Using New York state as an example, the Rockefeller report points out that New York pays massive money in taxes. Similarly, Virginia has a a slew of high earners. However, because many of Virginia’s residents earn a federal wage, Virginia occupies the upper right region of the right quadrant:

Our Bottom Line: Redistribution

Rewinding to the 1930s, we can see the benefits of states sharing a common pot of spending and revenue.

Mortgages and Wildfires

Mortgages

In 1938, when Fannie Mae began as a federal agency, a part of her mission was to move money. At the time, because of the 1927 McFadden Act, interstate banking was prohibited. As a result, there was insufficient money for mortgages in one region and too much unused mortgage money elsewhere. By buying mortgages from banks and brokers, Fannie Mae was able to move money to areas that needed it. Meanwhile, by selling the mortgages she purchased, she could attract funding from the areas that had it to lend.

Wildfires

During an emergency, money also moves from areas that have it to those that need it. Here, we can specifically talk about the federal budget. Implemented by FEMA during natural disasters, immediate relief pays for food or larger amounts of assistance. It is also possible that FEMA will refer people to the Small Business Administration’s disaster loan program where businesses, and homeowners, and renters can do low interest borrowing. As with Fannie Mae, the key here is that the nation funds disaster spending by moving money.

Indeed, whether looking at finance or catastrophes, we can see why we need the national coffers that tie us together.

My sources and more: Thanks to Axios for inspiring today’s post and the Rockefeller Institute of Government report for the details.