Stephen Reader covers politics for It's a Free Country, WNYC's interactive politics site. He joined the station in 2010 and has also worked for Studio 360, WNYC's Peabody Award-winning show about art, culture, and creativity.
Explainer: How America Redistributes Wealth, State by State
Tuesday, August 16, 2011
When it comes to divvying up tax revenue, states with richer citizens end up footing the bill for those with lower per capita income.
It's A Free Country blogger Steffen Schmidt touched on this last week, following a report from The Economist on the "fiscal transfer" phenomenon that effectively makes some states creditors and others debtors, echoing the Eurozone.
Essentially, you can subtract the amount of federal spending in a state from the amount of federal tax revenue collected from the state. If that number is negative, the state is getting more than it pays in. If the number is positive, the state pays more into the system than it receives.
By this measure, Delaware is our most "generous" state, paying about $211 billion in federal taxes over the last 20 years while only receiving about $86 in federal spending. New Mexico "mooches" most, paying $115 billion in taxes since 1990 but getting $316 billion back over the same period of time.
There are two interesting things to note here. First, creditor states have higher per capita incomes. Of the top 25 states for per capita income, 17 are creditors, giving more to the federal government than they get. Of the bottom 25 states for per capita income, all but four are debtors.
So in a sense, the redistribution of wealth that makes Republican lawmakers so panicky is already happening. Money from states with a richer citizenry traditionally goes to states with a poorer population, whether to pay the salaries of government employees, to pay for retirement or disability services, or to provide grants for special projects.
The second interesting thing: Debtor states with lower per capita income tend to be red. Mississippi, Arizona, Kansas, Louisiana and other states that usually vote Republican get more federal money than they spend in taxes. Liberal enclaves like New York, California and Connecticut see the least bang for buck in their backyard.
There are exceptions, of course. Maryland and Virginia are wealthy creditors that lean right, while Maine and West Virginia are poorer debtors that swing left from time to time. But overall, the trend sticks: how is it that the anti-spending, anti-tax, anti-wealth-redistributing party tends to represent the states that benefit most from tax revenues collected elsewhere?