2016’s Most & Least Federally Dependent States by John S Kiernan, WalletHub
The extent to which the average American’s tax burden varies based on his or her state of residence represents a significant point of differentiation between state economies. But it’s only one piece of the puzzle.
What if, for example, a particular state can afford not to tax its residents at high rates because it receives disproportionately more funding from the federal government than states with apparently oppressive tax codes? That would change the narrative significantly, revealing federal dependence where bold, efficient stewardship was once thought to preside.
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The idea of the American freeloader burst into the public consciousness when #47percent started trending on Twitter in 2012. And though the notion is senselessly insulting to millions of hardworking Americans, it is true that some states receive a far higher return on their federal income-tax contributions than others.
Just how pronounced is this disparity, and to what extent does it alter our perception of state and local tax rates around the country? WalletHub sought to answer those questions by comparing the 50 states in terms of three key metrics. Our findings, as well as expert commentary and a detailed methodology, can be found below.
2016’s Most & Least Federally Dependent States
With the tax deadline drawing near, the personal finance website WalletHub followed up on its report on the States with the Highest & Lowest Tax Rates with an in-depth analysis of 2016’s Most & Least Federally Dependent States to determine how dependent states with the lowest tax rates are compared with those paying the highest.
In order to identify which states most and least depend on federal support, WalletHub’s analysts compared the 50 states across three key metrics: 1) return on taxes paid to the federal government; 2) federal funding as a percentage of state revenue; and 3) share of federal jobs.
Comparing the States:
- With an average dependency ranking of 17.13, Red States are altogether more reliant on federal funding than Blue States, which ranked 33.23 on average. (The lower the ranking, the more dependent the state.)
- There is a 63 percent correlation between a state’s federal dependency and its per-capita GDP. That means the least wealthy states tend to receive the most federal support.
- Kansas is the 4th least federally dependent state, making sense of the fact that it has the 11th highest tax rates in the nation. On the flip side, Tennessee is the 5th most federally dependent state and, as can also be expected from that ranking, pays the 6th lowest tax rates.
Red vs. Blue States