Ah, food for the soul from Francis of Assisi. Wonderful advice for us personally but not necessarily helpful advice if you are a State Treasurer in the U.S. States and municipalities are reeling today financially and trying to squeeze blood from every turnip. They need cash and they need it quick, especially from Washington. We all pay taxes annually to the Federal coffers. Washington in turn pays us in the form of Social Security and Medicaid, Federal grants, military and other procurement, and salaries for Federal workers.
What we pay in, however, is not exactly what we get back. Some states pay in a lot more than they get back and vice versa; some get a lot more back than they pay in. In a democracy with progressive tax rates this is the trade-off we live with; high-wage states with high tax receipts subsidize low-wage states with high social needs.
The chart below shows on a per capita basis the “Balance of Payments” each state runs with Washington. Connecticut, a high-income state, sends $2,254 more per capita to Washington than it receives back whereas Kentucky, a poorer state with good political connections (think Mitch McConnell), receives back $10,110 more per person than it sends in.
It is not perfect correlation but in general the wealthier East and West coast states are senders (New York, New Jersey, Massachusetts, Connecticut and to some extent California) while the poorer South (Alabama, Mississippi, West Virginia and Louisiana) are receivers. Then the politics take over. The East and West Coast are primarily Blue and Democratic while the South is generally Red and Republican. Every politician of every stripe is up in arms: we pay too much and receive too little!
Two of the most interesting outliers here are Virginia and Maryland, both wealthy states. They are also among the biggest receiving states; Virginia is actually the biggest. I guess they are testament to the old adage: “Where you stand depends on where you sit.” They sit conveniently right next to the fiscal spigot in Washington benefiting from big ticket Federal procurement contracts and Federal wages. No complaints from them.
