Wallethub compared the direct and indirect federal subsidy to all 50 states and DC by comparing federal taxes remitted; federal funding as a fraction of state revenue; and number of federal jobs per capita and produced a ranked list of the states with the greatest federal dependency. Unsurprisingly, the top ten are overwhelmingly Republican dominated "red" states with low state taxes and low average per-capita incomes thanks to harsh labor laws -- these states necessarily depend on federal money to make up the shortfall from their own politically expedient tax-holidays, and lack the robust middle-class who pay the largest percentage of their income in tax.
The top ten in order of dependency are Mississippi, New Mexico, Alabama, Louisiana, Maine, Montana, Tennessee, South Dakota and Arizona. The five states most independent of federal subsidy are (in order): Delaware, Illinois, Minnesota, New Jersey, and Connecticut.
The article is good and full of interesting footnotes -- for example, Delaware's seeming independence is largely illusory, an artifact of its stock franchise tax drawn from out-of-state companies.
What if, for example, a particular state can afford not to tax its residents at high rates because it’s receiving 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.
The idea of the American freeloader burst into the public consciousness when #47percent started trending on Twitter. And while 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 investment 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 and the District of Columbia in terms of three key metrics: 1) Return on Taxes Paid to the Federal Government; 2) Federal Funding as a Percentage of State Revenue; and 3) Number of Federal Employees Per Capita.
States Most & Least Dependent on the Federal Government [John S Kiernan/Wallethub] (via Making Light)