10 States Most Dependent on the Federal Government
The political rhetoric between red and blue states is not likely to end anytime soon. According to a new report, residents in red states are more likely to receive help from the federal government, which helps them keep local tax bills lower compared to blue states.
WalletHub recently analyzed the disparity between states and their share of federal funding. The study was based on government data and the three weighted metrics listed below.
- Return on taxes paid to the federal government: This illustrates how many dollars in federal funding state taxpayers receive for every one dollar in federal income taxes they pay. It excludes from the federal funding the loans/guarantees component because it does not represent permanent transfers from the federal government to a state.
- Federal funding as a percentage of state revenue: This metric shows how much of a state’s annual revenue, and theoretically its spending, is provided by the federal government. Without this money, revenue would have to be found elsewhere – perhaps via tax hikes – or else key state services would suffer.
- Number of federal employees per capita: This metric speaks to the federal government’s role as a nationwide employer, indicating the percentage of a state’s workforce that owes its very livelihood to Washington.
Red states are known for imposing lower taxes than blue states, but it appears they are able to do so because they are more dependent on federal funding. There was a 34.4 percent correlation between a state’s federal dependency and its tax rates, meaning the more dependent a state is on the federal government, the less likely it is to charge high tax rates. Red states had an average dependency ranking of 33.5, while blue states ranked 19.2 on average. Let’s take a look at the 10 states most dependent on the government, according to WalletHub.