Welcome to brain stuff from how Stuff Works. Hey there, brain stuff Lauren vogelbam here. Recently, California state legislators made headlines threatening to cut off tax payments to the federal government in response to President Donald Trump's executive order punishing so called sanctuary cities whose police forces do not hand
over illegal immigrants to the federal authorities. California is one of about fourteen donor states where residents pay far more in federal taxes than they get back in federal aid and contracts. While Californians are unlikely to commit mass tax evasion, it does bring up the question of why some states are more dependent on federal money than others. Joseph Henchman is vice president of Legal and State Projects at the
Tax Foundation, a nonpartisan organization dedicated to tax policy. He explained that there are several factors that affect how much bang each state gets for its tax buck. He said, on the revenue side, the biggest driver is the federal income tax, which is a very progressive since them. This refers to the fact that earners are taxed at higher rates as their income increases. He continued, so in places with higher incomes California and New York. They're putting a
lot more into the system. On the spending side, there are a lot of federal programs to help low income people, so if your state has a lot of low income people, you tend to be a net recipient. Back in two thousand five, the Tax Foundation published the very first state by state comparison showing how many federal dollars each state
receives for every dollar paid in federal taxes. At the time, New Jersey was the most generous donor state, paying nine thousand, nine hundred and two dollars in federal taxes per resident and only getting back six thousand, seven hundred and forty dollars in federal spending. That's sixty one cents for every tax dollar. Nevada was the second big donor, mostly because of taxes on casinos, followed by Connecticut, where it's high earning residents got back just sixty nine cents on their
federal tax dollar. The biggest recipient state in two thousand five was New mex Go, where taxpayers got a too for one special, receiving two dollars and three cents in federal spending for every dollar they paid in federal taxes. In addition to having one of the highest poverty levels of any state, New Mexico is also home to huge government run nuclear facilities, large military bases, and lots of
federally owned land. The other top recipient states were Mississippi, with its large low income population, and Alaska, whose small population numbers and long history of Washington d C earmarks resulted in nearly fourteen thousand dollars in federal spending per resident compared with five thousand, four hundred dollars in taxes paid.
Wallet Hub ran the numbers again in twenty six and found most states in roughly the same spots, with large swaths of the Deep South perceiving far more federal dollars per capita than New England and California. Overall, Kentucky, Mississippi, and New Mexico were the most dependent on federal funds,
and Delaware, Minnesota, and New Jersey were the least. Much has been made of the fact that red states states the typically vote Republican, received far more federal dollars per capita than blue states states that typically vote Democrat, even though Republicans strongly advocate for a smaller federal government. And cuts to entitlement programs in while it hubs analysis, wherein lower ranks I mean the state is more dependent on
the federal government. States that went read in twelve had an average dependency rank of seventeen point thirteen, while blue states averaged thirty three point twenty three. When the Tax Foundation looked specifically at how much a state's total revenue came from federal grants and aid, the numbers were pretty stark. Both Mississippi and Louisiana relied on federal aid for more than forty percent of their general revenue. Tennessee, Montana in
Kentucky came in just under all are read states. Sources of grants in aid include medicaid, transportation money, law enforcement grants, housing grants, anything. John Henchman said, where the Fed Government is cutting a check to the state government to then transfer it to recipients, there isn't a formula on how much federal money each state gets. Henchman points out that more than of the federal budget comprises Social Security, Medicare, Medicaid,
social programs like food stamps, and defense spending. Social Security is technically a trust fund and not aid. The rest of the money allocated to a state depends on the income of the people living there, whether military bases or defense contractors are located there, plus how good its politicians are at bringing home The proverbial pork of federal revenue comes from income tax and payroll taxes. Henchman is a Californian himself and understands why his neighbors grumble about subsidizing
federal aid programs and other states. For one thing, large amounts of federal spending allow red state governments to keep their taxes artificially low. The highest individual state income tax rate in Mississippi and Alabama in sixteen was five percent, while top earners in California and New York paid thirteen point three percent and eight point eight two percent, respectively.
Part of the problem is a far off federal government trying to legislate one size fits all solutions in states and localities with different needs, and some argue this redistribution helps to level the playing field for all citizens, regardless of which state they live in. Today's episode was written by Dave Ruse and produced by Tristan McNiel. For more on this and lots of other political unpacking, visit our home planet hostaff works dot com,