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Study: Red states depend more on fed dollars

| March 23, 2021 1:00 AM

A new report from financial research site WalletHub presents a picture which may seem surprising. Among 2021’s Most & Least Federally Dependent States, “Red” states are more reliant on federal funding than Blue states, which tend to be more financially independent from the feds by comparison, the report states.

Whether that’s bad or good depends on which tax structure you favor.

Simply measuring each state’s share of federal jobs, its share of federal funding as a source of state revenue, and the resulting return on taxes paid to the federal government, WalletHub ranked states according to their reliance on federal support last year.

The most federally dependent state was New Mexico, followed by Alaska, Mississippi, Kentucky, West Virginia, Montana, Arizona, Indiana, South Carolina and Louisiana.

The 10 least federally dependent were Kansas (50th, or most independent), New Jersey, Delaware, Utah, Iowa, Massachusetts, Washington, Illinois, Connecticut and Virginia.

Idaho ranked in the middle, at 23rd most dependent. Idaho’s share of federal jobs ranked 26th and its share of federal funding as a source of state revenue ranked 33. The Gem State’s return on federal taxes paid was $1.46, meaning for every $1 Idahoans paid in federal taxes, the state gets $1.46 back in federal programs and funding.

Neighboring Washington by comparison ranked 44th in dependency overall, 18 in share of federal jobs and 39 in share of federal funding as state revenue source. Washington’s return on the dollar for federal taxes paid was only 70 cents.

Using 2020 presidential election results, WalletHub then compared these findings to state returns. With an average dependency rank of 20.68, overall Red states were more reliant on federal funding than Blue states, which rank 30.32 on average (the lower the number, the more dependent).

If that sounds counterintuitive, consider state taxes. The more revenue a state has from its own taxes, the more independent from federal funding it can be. Illinois has the highest state tax in the nation and ranked as one of the least federally dependent. Alaska, with the lowest state tax, ranked second-most federally dependent.

When you throw local taxes into the picture, things shift a little, as states differ more in property, vehicle, and sales tax rates. That’s especially true in the case of Idaho. Adding local taxes to the state tax rates overall, Idaho’s overall rate of 8.43 percent ranks among the 10 lowest in the nation.

Whether the pot is local, state or federal, the dollars needed are the same. Which pot is more palatable may in part be connected to how one defines “community.”

Man has always needed to share resources within a community — from families to farming coops and government programs — in order to sustain society and self. At the heart of political discord lie different visions of the breadth and nature of that community.

For a more complete comparison of state and local tax rates by state, see “States with the Lowest Tax Rates” at https://wallethub.com/edu/best-worst-states-to-be-a-taxpayer/2416. For the federal funding dependency comparison see

https://wallethub.com/edu/states-most-least-dependent-on-the-federal-government/2700.


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Sholeh Patrick, J.D. is a columnist for the Hagadone News Network. Email Sholeh@cdapress.com.