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View Count: 96 |  Publish Date: April 06, 2014
Where's the money go? Often, to other states
Joel L. Naroff Posted: Sunday, April 6, 2014, 1:10 AM
The government takes but also gives back. Indeed, sometimes Washington is no more than a way station for our taxes. But the flow of money doesnt necessarily balance out. There are states that wind up being takers, while others are givers in this financial game of musical chairs.
The implications are enormous, as getting more from Uncle Sam can help build roads, hire teachers, or keep taxes down. Our region, unfortunately, has been very good at paying more than our fair share while other states have managed to drink deeply at the government trough.
There have been many report cards on how the federal government distributes the money it collects. The most recent was by WalletHub, which evaluated three measures:
How much a state receives compared with how much its residents pay in federal taxes. The more the better, especially if you like living off other peoples money.
Federal funding as a percent of state budgets, which represents a states financial dependence on the federal funds. The higher the percentage, the more a states costs are shifted to other states taxpayers.
Federal employment per citizen, which shows the federal governments impact on total employment in a state. The more jobs provided by Uncle Sam, the better.
So, how does our region measure up? In a word: Badly.
We tend to send more money to Washington than we get back. Delaware takes the prize for receiving the least with only $0.50 on the dollar being returned, while New Jersey ranks 10th with only $0.88 per dollar paid. In other words, an awful lot of New Jerseys and Delawares taxes go to support people, businesses, and governments in other states.
Pennsylvania does better, as it gets $1.31 back. This puts it pretty much in the middle of the pack.
In contrast, a number of states make out like bandits. The top five states for getting more than they give are: South Carolina, which rakes in $7.87 for every dollar it pays; North Dakota, which gets $5.31; Florida, with $4.57; Louisiana, which collects $3.35; and Alabama, at $3.35.
These states are mostly in the South. Indeed, when you add in sixth-ranked Mississippi to the mix, it becomes clear that the takers tend to be in the Southern tier while the Northeast and Midwest are where most of the contributing states exist.
The recipient states put those funds to good use: They subsidize their revenues greatly with the money. For example, nearly 45 percent of Mississippis budget can be ascribed to federal funds, while in Louisiana it is more than 44 percent.
How do our local states compare? Delaware gets a little more than 25 percent, New Jersey about 27.5 percent, and Pennsylvania comes in at 31 percent. New Jersey and Delaware are in the bottom 10 for dependence on the feds, while Pennsylvania is 18th.
It should be no surprise that we are also some of the highest-taxed states.
Yes, there are rational explanations for these discrepancies. Poverty is high in many Southern states, creating extensive social needs. That leads to raised federal payments. Many Southern politicians dont like spending money on their populace, which means their budgets are lower and therefore the share coming from the federal government is elevated. These states have the fiscal capacity to spread more of their own wealth, but they dont, and instead let the federal government help out.
That the Southern states actually depend so much on the federal government raises some very interesting issues. In the U.S. Congress, everyone seems to be talking about tightening belts. But are the people who make the most noise willing to cut the funds they are so dependent upon? Yeah, right.
And that reminds me of a memorable scene from The West Wing television series. During a presidential election debate between very liberal President Bartlet and very conservative Florida Gov. Ritchie, the governor comments that Washington should let the communities decide on health care, on education, on lower taxes, not higher taxes. Bartlet responded: . . . your state of Florida got $12.6 billion in federal money last year - from Nebraskans, and Virginians, and New Yorkers, and Alaskans. He finished his rebuttal with the question: Can we have it back, please?
There are states that take and states that give. This regions states give. So the next time someone from the taking states complains about aid for things such as Hurricane Sandy reconstruction, ask them one simple question: Can we have our money back, please?
Joel L. Naroff is president and chief economist of Naroff Economic Advisors Inc. in Holland, Bucks County. He is coauthor of Big Picture Economics: How to Navigate the New Global Economy.
jnaroff@phillynews.com
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