Speaker 1: Welcome to brain stuff from how Stuff Works. Hey there,
Speaker 1: brain stuff Lauren vogelbam here. Recently, California state legislators made
Speaker 1: headlines threatening to cut off tax payments to the federal
Speaker 1: government in response to President Donald Trump's executive order punishing
Speaker 1: so called sanctuary cities whose police forces do not hand
Speaker 1: over illegal immigrants to the federal authorities. California is one
Speaker 1: of about fourteen donor states where residents pay far more
Speaker 1: in federal taxes than they get back in federal aid
Speaker 1: and contracts. While Californians are unlikely to commit mass tax evasion,
Speaker 1: it does bring up the question of why some states
Speaker 1: are more dependent on federal money than others. Joseph Henchman
Speaker 1: is vice president of Legal and State Projects at the
Speaker 1: Tax Foundation, a nonpartisan organization dedicated to tax policy. He
Speaker 1: explained that there are several factors that affect how much
Speaker 1: bang each state gets for its tax buck. He said,
Speaker 1: on the revenue side, the biggest driver is the federal
Speaker 1: income tax, which is a very progressive since them. This
Speaker 1: refers to the fact that earners are taxed at higher
Speaker 1: rates as their income increases. He continued, so in places
Speaker 1: with higher incomes California and New York. They're putting a
Speaker 1: lot more into the system. On the spending side, there
Speaker 1: are a lot of federal programs to help low income people,
Speaker 1: so if your state has a lot of low income people,
Speaker 1: you tend to be a net recipient. Back in two
Speaker 1: thousand five, the Tax Foundation published the very first state
Speaker 1: by state comparison showing how many federal dollars each state
Speaker 1: receives for every dollar paid in federal taxes. At the time,
Speaker 1: New Jersey was the most generous donor state, paying nine thousand,
Speaker 1: nine hundred and two dollars in federal taxes per resident
Speaker 1: and only getting back six thousand, seven hundred and forty
Speaker 1: dollars in federal spending. That's sixty one cents for every
Speaker 1: tax dollar. Nevada was the second big donor, mostly because
Speaker 1: of taxes on casinos, followed by Connecticut, where it's high
Speaker 1: earning residents got back just sixty nine cents on their
Speaker 1: federal tax dollar. The biggest recipient state in two thousand
Speaker 1: five was New mex Go, where taxpayers got a too
Speaker 1: for one special, receiving two dollars and three cents in
Speaker 1: federal spending for every dollar they paid in federal taxes.
Speaker 1: In addition to having one of the highest poverty levels
Speaker 1: of any state, New Mexico is also home to huge
Speaker 1: government run nuclear facilities, large military bases, and lots of
Speaker 1: federally owned land. The other top recipient states were Mississippi,
Speaker 1: with its large low income population, and Alaska, whose small
Speaker 1: population numbers and long history of Washington d C earmarks
Speaker 1: resulted in nearly fourteen thousand dollars in federal spending per
Speaker 1: resident compared with five thousand, four hundred dollars in taxes paid.
Speaker 1: Wallet Hub ran the numbers again in twenty six and
Speaker 1: found most states in roughly the same spots, with large
Speaker 1: swaths of the Deep South perceiving far more federal dollars
Speaker 1: per capita than New England and California. Overall, Kentucky, Mississippi,
Speaker 1: and New Mexico were the most dependent on federal funds,
Speaker 1: and Delaware, Minnesota, and New Jersey were the least. Much
Speaker 1: has been made of the fact that red states states
Speaker 1: the typically vote Republican, received far more federal dollars per
Speaker 1: capita than blue states states that typically vote Democrat, even
Speaker 1: though Republicans strongly advocate for a smaller federal government. And
Speaker 1: cuts to entitlement programs in while it hubs analysis, wherein
Speaker 1: lower ranks I mean the state is more dependent on
Speaker 1: the federal government. States that went read in twelve had
Speaker 1: an average dependency rank of seventeen point thirteen, while blue
Speaker 1: states averaged thirty three point twenty three. When the Tax
Speaker 1: Foundation looked specifically at how much a state's total revenue
Speaker 1: came from federal grants and aid, the numbers were pretty stark.
Speaker 1: Both Mississippi and Louisiana relied on federal aid for more
Speaker 1: than forty percent of their general revenue. Tennessee, Montana in
Speaker 1: Kentucky came in just under all are read states. Sources
Speaker 1: of grants in aid include medicaid, transportation money, law enforcement grants,
Speaker 1: housing grants, anything. John Henchman said, where the Fed Government
Speaker 1: is cutting a check to the state government to then
Speaker 1: transfer it to recipients, there isn't a formula on how
Speaker 1: much federal money each state gets. Henchman points out that
Speaker 1: more than of the federal budget comprises Social Security, Medicare, Medicaid,
Speaker 1: social programs like food stamps, and defense spending. Social Security
Speaker 1: is technically a trust fund and not aid. The rest
Speaker 1: of the money allocated to a state depends on the
Speaker 1: income of the people living there, whether military bases or
Speaker 1: defense contractors are located there, plus how good its politicians
Speaker 1: are at bringing home The proverbial pork of federal revenue
Speaker 1: comes from income tax and payroll taxes. Henchman is a
Speaker 1: Californian himself and understands why his neighbors grumble about subsidizing
Speaker 1: federal aid programs and other states. For one thing, large
Speaker 1: amounts of federal spending allow red state governments to keep
Speaker 1: their taxes artificially low. The highest individual state income tax
Speaker 1: rate in Mississippi and Alabama in sixteen was five percent,
Speaker 1: while top earners in California and New York paid thirteen
Speaker 1: point three percent and eight point eight two percent, respectively.
Speaker 1: Part of the problem is a far off federal government
Speaker 1: trying to legislate one size fits all solutions in states
Speaker 1: and localities with different needs, and some argue this redistribution
Speaker 1: helps to level the playing field for all citizens, regardless
Speaker 1: of which state they live in. Today's episode was written
Speaker 1: by Dave Ruse and produced by Tristan McNiel. For more
Speaker 1: on this and lots of other political unpacking, visit our
Speaker 1: home planet hostaff works dot com,