Federal taxation and spending by state

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The ability of the United States government to tax and spend in specific regions has large implications to economic activity and performance. Taxes are indexed to wages and profits and therefore areas of high taxation are correlated with areas of higher per capita income and more economic activity.

Contents

Spending is largely focused on areas of poverty, the elderly, and centers of federal employment such as military bases.

Background

The ability of the government to tax and spend in specific regions has large implications to economic activity and performance. The main question behind this issue stems into three different approaches. First, federal spending should be neutral, meaning federal taxation should roughly equal expenditures. Second, it should be redistributive, meaning rich states should be taxed most heavily and poorer states should receive more benefits. Third, spending and taxation should be accidental per se, meaning higher taxation should be performed based on income but with little relation to geographic region and spending should be done where it allows for the most efficiency. The main issue driving this research is the question between equity and equality (Leonard and Walder, Page 17).

Typically, it is seen taxes are highly indexed to wages and therefore places of high taxation are geographically found in areas with higher per capita income. The problem with taxation indexed to wages is that it does not consider cost of living. In areas with higher per capita income, it is highly likely that the cost of living is also higher; for instance, this is the case in New York. The effect of not indexing to costs of living makes some states look wealthier compared to others. It is typical that states with low costs of living receive more in spending than states with high costs of living (Leonard and Walder, Page 19). After discounting income with costs of living, New York's poverty level increases a significant amount (Pear, Page 2). The significance level between high levels of poverty and high taxation may be arguable.

Spending is not so easily located geographically. The breakdown of federal spending is done in the following ways: defense (military), non-defense discretionary, Social Security, Medicare, grants, and various other programs. Defense spending is the most volatile, as it is usually found to be higher in states with established defense contractors and other defense facilities. Areas of higher social insurance spending are typically seen in areas of larger elderly population. Social security is the dominant expenditure of per dollar federal expenditures.

In the United States, Social Security is the commonly used term for the federal Old-Age, Survivors, and Disability Insurance (OASDI) program and is administered by the Social Security Administration. The original Social Security Act was signed into law by President Franklin D. Roosevelt in 1935, and the current version of the Act, as amended, encompasses several social welfare and social insurance programs.

Medicare (United States) United States single-payer national social insurance program

Medicare is a national health insurance program in the United States, begun in 1966 under the Social Security Administration (SSA) and now administered by the Centers for Medicare and Medicaid Services (CMS). It provides health insurance for Americans aged 65 and older, younger people with some disability status as determined by the Social Security Administration, as well as people with end stage renal disease and amyotrophic lateral sclerosis.

Other factors of spending are largely political in the sense that politicians who can effectively argue for more spending get the most spending for their states. Some trends of spending as of 1999 are as follows: defense spending in the South and the national capital, non-defense discretionary spending between the Midwest and the Rockies, most Medicare and Social Security is located in the East and Central/Midwest, and other assistance programs following the Appalachian Mountains from Louisiana/Mississippi to Maine (Leonard and Walder, Page 30).

Louisiana State of the United States of America

Louisiana is a state in the Deep South region of the South Central United States. It is the 31st most extensive and the 25th most populous of the 50 United States. Louisiana is bordered by the state of Texas to the west, Arkansas to the north, Mississippi to the east, and the Gulf of Mexico to the south. A large part of its eastern boundary is demarcated by the Mississippi River. Louisiana is the only U.S. state with political subdivisions termed parishes, which are equivalent to counties. The state's capital is Baton Rouge, and its largest city is New Orleans.

Mississippi State of the United States of America

Mississippi is a state located in the southeastern region of the United States. Mississippi is the 32nd largest and 34th-most populous of the 50 United States. Mississippi is bordered to the north by Tennessee, to the east by Alabama, to the south by the Gulf of Mexico, to the southwest by Louisiana, and to the northwest by Arkansas. Mississippi's western boundary is largely defined by the Mississippi River. Jackson is both the state's capital and largest city. Greater Jackson, with an estimated population of 580,166 in 2018, is the most populous metropolitan area in Mississippi and the 95th-most populous in the United States.

Federal spending by state as of FY 2013

Through fiscal year 2010, the Census Bureau produced the annual Consolidated Federal Funds Report, tracking Federal expenditures both geographically and by agency and program. As of 2011, funding for the Federal Financial Statistics program, of which the CFFR was part, was cut from the Federal budget. Private organizations such as the National Priorities Project and The Pew Charitable Trusts have since developed their own reports. [1] (The tables below are from the 2014 Pew report.)

National Priorities Project (NPP) is an American non-governmental organization based in Northampton, MA that aims to help citizens shape the federal budget by arming them with information they can use and understand. In 2014, the organization was nominated for a Nobel Peace Prize for their research on U.S. military spending.

The Pew Charitable Trusts foundation

The Pew Charitable Trusts is an independent non-profit, non-governmental organization (NGO), founded in 1948.

Total federal spending in millions of dollars, by state, federal fiscal 2013

State
federal district
or territory
Retirement benefitsNonretirement benefitsGrantsContractsSalaries and wagesTotal
United States$1,061,181$870,048$506,475$407,277$303,990$3,148,971
Alabama$20,923$14,662$6,155$9,668$5,355$56,762
Alaska$2,073$1,589$2,649$1,628$2,628$10,568
Arizona$22,360$18,262$9,058$12,350$5,275$67,306
Arkansas$11,865$8,315$5,484$944$1,906$28,514
California$101,841$98,526$66,693$47,657$29,008$343,725
Colorado$16,020$10,896$7,092$8,013$6,641$48,664
Connecticut$11,646$10,527$7,047$10,401$1,831$41,452
Delaware$3,673$2,668$1,742$272$692$9,047
District of Columbia$3,116$1,867$4,963$16,784$21,056$47,785
Florida$76,959$66,541$19,062$14,089$14,180$190,831
Georgia$31,894$25,590$11,625$7,625$11,797$88,532
Hawaii$5,336$3,444$2,881$1,898$5,750$19,309
Idaho$5,440$3,629$2,377$2,574$1,118$15,139
Illinois$38,047$35,761$17,614$6,497$7,565$105,483
Indiana$22,338$17,623$9,434$3,140$2,961$55,496
Iowa$10,461$7,697$4,783$1,600$1,341$25,883
Kansas$9,854$7,267$1,888$1,720$3,514$24,243
Kentucky$16,765$13,003$6,604$6,436$5,219$48,027
Louisiana$14,740$13,849$9,019$3,437$3,656$44,701
Maine$5,610$3,976$3,186$2,079$1,227$16,078
Maryland$23,739$15,129$9,950$25,598$18,570$92,987
Massachusetts$21,146$20,795$15,039$14,572$4,077$75,631
Michigan$37,086$31,458$16,488$4,810$4,173$94,014
Minnesota$16,866$12,757$9,051$3,045$2,585$44,304
Mississippi$11,134$9,516$5,153$5,786$2,719$34,308
Missouri$22,206$16,613$11,566$9,933$5,135$65,452
Montana$3,933$2,392$2,272$443$1,109$10,148
Nebraska$6,231$4,300$2,539$968$1,598$15,636
Nevada$8,694$6,830$2,721$2,884$2,052$23,181
New Hampshire$5,096$3,229$1,649$1,788$653$12,414
New Jersey$28,547$27,645$15,393$6,442$4,546$82,573
New Mexico$7,710$5,471$4,690$6,696$2,987$27,554
New York$61,170$59,858$52,863$10,744$10,700$195,334
North Carolina$35,810$27,085$14,202$4,954$11,856$93,907
North Dakota$2,215$1,499$1,566$490$1,035$6,805
Ohio$39,271$33,182$16,221$6,265$6,633$101,573
Oklahoma$14,606$10,148$6,400$2,031$4,666$37,851
Oregon$14,355$10,490$4,515$1,123$2,231$32,713
Pennsylvania$48,861$40,341$21,898$16,181$7,707$134,989
Rhode Island$3,819$3,420$2,410$767$1,134$11,549
South Carolina$19,388$13,637$5,695$5,440$4,624$48,784
South Dakota$2,963$1,984$1,558$565$955$8,025
Tennessee$24,307$19,083$9,378$7,641$4,100$64,508
Texas$72,354$64,922$35,184$39,051$22,947$234,459
Utah$7,095$5,049$3,516$2,237$2,723$20,620
Vermont$2,359$1,729$1,888$393$546$6,915
Virginia$34,719$17,910$9,081$51,186$25,133$138,029
Washington$24,551$16,688$10,541$11,736$9,422$72,937
West Virginia$8,485$5,855$3,992$1,153$1,831$21,317
Wisconsin$19,570$14,181$8,623$3,224$2,137$47,735
Wyoming$1,935$1,157$1,081$317$687$5,177

[2]

Per capita federal spending, by state, federal fiscal 2013

State
federal district
or territory
Retirement benefitsNonretirement benefitsGrantsContractsSalaries and wagesTotal
United States$3,357$2,752$1,602$1,288$962$9,961
Alabama$4,329$3,033$1,273$2,000$1,108$11,743
Alaska$2,820$2,162$3,604$2,215$3,575$14,375
Arizona$3,374$2,756$1,367$1,864$796$10,157
Arkansas$4,009$2,810$1,853$319$644$9,635
California$2,657$2,570$1,740$1,243$757$8,967
Colorado$3,041$2,068$1,346$1,521$1,261$9,237
Connecticut$3,238$2,927$1,960$2,892$509$11,527
Delaware$3,967$2,882$1,882$294$748$9,773
District of Columbia$4,820$2,887$7,678$25,963$32,572$73,920
Florida$3,936$3,403$975$721$725$9,760
Georgia$3,192$2,561$1,163$763$1,181$8,860
Hawaii$3,801$2,453$2,052$1,351$4,095$13,752
Idaho$3,375$2,251$1,474$1,597$693$9,390
Illinois$2,953$2,776$1,367$504$587$8,188
Indiana$3,400$2,682$1,436$478$451$8,446
Iowa$3,385$2,491$1,548$518$434$8,375
Kansas$3,405$2,511$652$594$1,214$8,377
Kentucky$3,814$2,958$1,502$1,464$1,188$10,927
Louisiana$3,187$2,994$1,950$743$790$9,664
Maine$4,223$2,993$2,399$1,565$924$12,104
Maryland$4,004$2,552$1,678$4,318$3,132$15,684
Massachusetts$3,160$3,107$2,247$2,177$609$11,300
Michigan$3,748$3,179$1,666$486$422$9,501
Minnesota$3,112$2,354$1,670$562$477$8,174
Mississippi$3,722$3,181$1,723$1,934$909$11,469
Missouri$3,674$2,749$1,914$1,643$850$10,829
Montana$3,874$2,356$2,238$436$1,092$9,996
Nebraska$3,335$2,301$1,359$518$855$8,368
Nevada$3,116$2,448$975$1,033$735$8,308
New Hampshire$3,850$2,440$1,246$1,351$493$9,380
New Jersey$3,208$3,106$1,730$724$511$9,279
New Mexico$3,697$2,624$2,249$3,211$1,432$13,213
New York$3,113$3,046$2,690$547$544$9,940
North Carolina$3,636$2,750$1,442$503$1,204$9,536
North Dakota$3,062$2,072$2,165$678$1,430$9,407
Ohio$3,394$2,868$1,402$541$573$8,778
Oklahoma$3,793$2,636$1,662$528$1,212$9,830
Oregon$3,653$2,669$1,149$286$568$8,324
Pennsylvania$3,825$3,158$1,714$1,267$603$10,568
Rhode Island$3,632$3,252$2,292$729$1,078$10,984
South Carolina$4,060$2,856$1,193$1,139$968$10,217
South Dakota$3,507$2,348$1,844$669$1,131$9,499
Tennessee$3,742$2,938$1,444$1,176$631$9,930
Texas$2,736$2,455$1,330$1,477$868$8,865
Utah$2,446$1,740$1,212$771$939$7,108
Vermont$3,764$2,760$3,013$628$871$11,036
Virginia$4,203$2,168$1,099$6,197$3,043$16,710
Washington$3,522$2,394$1,512$1,683$1,351$10,462
West Virginia$4,576$3,158$2,153$622$988$11,496
Wisconsin$3,408$2,469$1,502$561$372$8,312
Wyoming$3,321$1,986$1,856$544$1,178$8,885

[3]

The balance of payments receipts has typically remained fairly stable over the past fifteen years with limited changes between those states with net benefits and those with net contributions. The Fisc states that the federal deficit increased due to human resource expenditures, increased tax cuts, and increased military expenditure during the 1980s. The Fisc further reports that in expectations and defense spending declined in the 1990s one would expect the expenditure per state to decrease along with the government. However, some states, such as Kentucky, Idaho and Oklahoma, actually saw large increases in defense spending, which increased their BOP. Overall, though, increases in non-defense spending were not on the same magnitude as the decline of defense spending (Leonard and Walder, Page 36–39).

Kentucky State of the United States of America

Kentucky, officially the Commonwealth of Kentucky, is a state located in the east south-central region of the United States. Although styled as the "State of Kentucky" in the law creating it, (because in Kentucky's first constitution, the name state was used) Kentucky is one of four U.S. states constituted as a commonwealth. Originally a part of Virginia, in 1792 Kentucky split from it and became the 15th state to join the Union. Kentucky is the 37th most extensive and the 26th most populous of the 50 United States.

Idaho State of the United States of America

Idaho is a state in the northwestern region of the United States. It borders the state of Montana to the east and northeast, Wyoming to the east, Nevada and Utah to the south, and Washington and Oregon to the west. To the north, it shares a small portion of the Canadian border with the province of British Columbia. With a population of approximately 1.7 million and an area of 83,569 square miles (216,440 km2), Idaho is the 14th largest, the 12th least populous and the 7th least densely populated of the 50 U.S. states. The state's capital and largest city is Boise.

Oklahoma State of the United States of America

Oklahoma is a state in the South Central region of the United States, bordered by Kansas on the north, Missouri on the northeast, Arkansas on the east, Texas on the south and west, New Mexico on the west, and Colorado on the northwest. It is the 20th-most extensive and the 28th-most populous of the fifty United States. The state's name is derived from the Choctaw words okla and humma, meaning "red people". It is also known informally by its nickname, "The Sooner State", in reference to the non-Native settlers who staked their claims on land before the official opening date of lands in the western Oklahoma Territory or before the Indian Appropriations Act of 1889, which dramatically increased European-American settlement in the eastern Indian Territory. Oklahoma Territory and Indian Territory were merged into the State of Oklahoma when it became the 46th state to enter the union on November 16, 1907. Its residents are known as Oklahomans, and its capital and largest city is Oklahoma City.

The report argues that defense and Social Security and Medicare have a small negative correlation, and as a result large reductions in defense spending do not bode well for increases in spending on Social Security or Medicare. Defense expenditures tend to be the most volatile over time and state, however, total expenditures are roughly constant, which means that increases (decreases) in defense correlate with decreases (increases) in other non-defense and non- social insurance expenditures. Income taxes used to finance expenditures are not extremely volatile around the national average.

Changes in expenditure

Decrease in defense expenditure has been a large key to overall changes in expenditure, both in salaries for bases and for procurement of defense. Due to restructuring or closing military bases, as determined by the Base Closure and Realignment Commission, most states have incurred declines in defense spending via salaries. California, with 24 recommendations for closure or realignment, has had the largest decline in defense spending, which attributes to a loss of roughly $50 billion, given the population increase since the early 1980s. Most states have also seen decline in procurement defense spending, but eight states have seen it increase, and in Kentucky's case it has doubled (Leonard and Walder, Page 36-39, 44-47).

California State of the United States of America

California is a state in the Pacific Region of the United States. With 39.6 million residents across a total area of about 163,696 square miles (423,970 km2), California is the most populous U.S. state and the third-largest by area. The state capital is Sacramento. The Greater Los Angeles Area and the San Francisco Bay Area are the nation's second- and fifth-most populous urban regions, with 18.7 million and 9.7 million residents respectively. Los Angeles is California's most populous city, and the country's second-most populous, after New York City. California also has the nation's most populous county, Los Angeles County, and its largest county by area, San Bernardino County. The City and County of San Francisco is both the country's second-most densely populated major city after New York City and the fifth-most densely populated county, behind only four of the five New York City boroughs.

Social Security has increased in expenditure primarily in the Southern states. It was thought that since the largest expenditure is retirement aid that social security expenditure was following the elderly. However, this was not the case, as the data did not correlate between elderly population and increases in social security expenditure. Further expenditures in social security are caused by the increase in disability insurance. The Fisc argues that the later policy changes in the 1980s involving beneficiary eligibility may have a time lag, meaning the causes of those changes are just now being felt. Medicare costs have continued to increase as well as the population ages and as health care costs increase. Most of the increased expenditure has been seen in the south. Grants have increased, but have been relatively stable over the fifteen-year period taken into consideration. The largest increase has been in the form of Medicaid expenditures (Leonard and Walder, Page 47-54).

Medicaid United States social health care program for families and individuals with limited resources

Medicaid in the United States is a federal and state program that helps with medical costs for some people with limited income and resources. Medicaid also offers benefits not normally covered by Medicare, including nursing home care and personal care services. The Health Insurance Association of America describes Medicaid as "a government insurance program for persons of all ages whose income and resources are insufficient to pay for health care." Medicaid is the largest source of funding for medical and health-related services for people with low income in the United States, providing free health insurance to 74 million low-income and disabled people as of 2017. It is a means-tested program that is jointly funded by the state and federal governments and managed by the states, with each state currently having broad leeway to determine who is eligible for its implementation of the program. States are not required to participate in the program, although all have since 1982. Medicaid recipients must be U.S. citizens or qualified non-citizens, and may include low-income adults, their children, and people with certain disabilities. Poverty alone does not necessarily qualify someone for Medicaid.

The changes in taxes have remained fairly stable over time, and are strongly correlated with income per capita per state. It follows that as state's per capita income rises, its tax receipt also increases. The data between changes in per capita taxes to the national averages in ratio to the changes in the per capita income to the national average has a correlation of .88 (Leonard and Walder, Page 56-57).

History of federal monitoring of taxation and spending by state

The monitoring of federal spending and taxation and its variation between states in the United States began in 1977 under a query run by Daniel Patrick Moynihan, Democratic senator of New York. The query was designed to determine whether the state of New York was paying more in taxes than it was receiving in federal spending. The determination is made by looking at an individual state's balance of payments (BOP), which is total income minus outlays.

Initially, many thought New York was a net gainer, receiving more funding than it was paying out in taxes, because of large payments to the Federal Reserve Bank of New York, but in actuality, those payments were interest payments on the United States federal debt, which were distributed to foreign individuals and governments for purchasing of US Treasury bonds (Leonard and Walder, Page 9). After separating those expenditures from actual expenditures in New York, it was found that the state was actually a donor. This event stimulated more controversy over the topic of spending and taxation.

After the Federal Community Services Administration noticed the flaw in the balance of payments in New York, it revised its data and provided the revised data under the title The Geographical Distribution of Federal Expenditures, which was used in determining the expenditures for this analysis. This is now entitled "the Fisc".

Politics and controversy of unequal contributions by states to the federal budget

The US Constitution requires that direct taxes be apportioned to the states according to their population, so that per capita revenues from the states would be equal. Indirect taxes do not have this restriction. After a US Supreme Court case held that an income tax on income derived from property was in the same category as a direct tax on property, the 16th amendment was passed to allow indirect taxation on income in proportion to their income, from what ever source. [4] Since that time, taxation as well as spending per capita has ranged widely between the states. (See table below). At the same time, one of the great controversies of national politics has become whether to increase or decrease federal spending and the size of the federal government, with Republicans largely in favor of decreasing its size and Democrats pushing to keep it the same or increase it. [5]

Several commentators have pointed out that the states that benefit the most by federal spending are the very states whose populations tend to vote for leaders who promise to reduce federal spending, while those that benefit the least from large government vote for politicians who promise to make it even larger at their expense. In other words, Democratic-leaning states tend to be net contributors to the federal budget while Republican-leaning states are more often net recipients of federal spending. Various explanations for this seemingly contradictory situation exist. [6] [7] [8]

See also

US taxation:

Notes

  1. Chokshi, Niraj (16 October 2014). "The government cut a valuable report on federal spending on states. Now two think tanks are trying to recreate it". The Washington Post. Retrieved 12 January 2016.
  2. "Federal Spending in the States 2004 to 2013". The Pew Charitable Trusts. Retrieved 12 January 2016.
  3. "Federal Spending in the States 2004 to 2013". The Pew Charitable Trusts. Retrieved 12 January 2016.
  4. "The Constitution of the United States: Amendments 11-27". archives.gov.
  5. https://www.nytimes.com/2011/03/03/us/politics/03congress.html?_r=1
  6. "Why Do Some States Feast on Federal Spending, Not Others?". Tax Foundation.
  7. "Red-State Moochers: Federal Taxes Favor Those Who Complain the Most About Federal Taxes". Alternet.
  8. "Blame FDR and LBJ for 'Moocher' Paradox in Red States". BloombergView.com. 19 September 2012.

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The economic impact of illegal immigrants in the United States is challenging to measure, and politically contentious. The scarcity of reliable statistics leaves room for many methods of study, leading to diverse conclusions.

The Path to Prosperity

The Path to Prosperity: Restoring America's Promise was the Republican Party's budget proposal for the Federal government of the United States in the fiscal year 2012. It was succeeded in March 2012 by "The Path to Prosperity: A Blueprint for American Renewal", the Republican budget proposal for 2013. Representative Paul Ryan, Chairman of the House Budget Committee, played a prominent public role in drafting and promoting both The Path to Prosperity proposals, and they are therefore often referred to as the Ryan budget, Ryan plan or Ryan proposal.

Deficit reduction in the United States

Deficit reduction in the United States refers to taxation, spending, and economic policy debates and proposals designed to reduce the Federal budget deficit. Government agencies including the Government Accountability Office (GAO), Congressional Budget Office (CBO), the Office of Management and Budget (OMB),and the U.S. Treasury Department have reported that the federal government is facing a series of important long-run financing challenges, mainly driven by an aging population, rising healthcare costs per person, and rising interest payments on the national debt.

The United States fiscal cliff was a situation that took place in January 2013 when several previously-enacted laws came into effect simultaneously, increasing taxes and decreasing spending.

Health care finance in the United States discusses how Americans obtain and pay for their healthcare, and why U.S. healthcare costs are the highest in the world based on various measures.

All-payer rate setting is a price setting mechanism in which all third parties pay the same price for services at a given hospital. It can be used to increase the market power of payers versus providers, such as hospital systems, in order to control costs. All-payer characteristics are found in most developed economies with multi-payer healthcare systems, including France, Germany, Japan, and the Netherlands. The U.S. state of Maryland also uses such a model.

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