Comparative Federal Tax Contribution by State

As I look through the work here, the biggest thing this tells me is the per capita income by state.

New York is the most effective taxpayer, even net of federal aid, because they have such a high number of citizens earning very high salaries. Wall Street, big corporate execs, investment bankers, consultants, employees of the accounting firms, media outlets, and on and on. These same citizens are the ones who generate a great deal of income and capital gains through their securities assets - this also generates tax for the federal government. It is these high earners that are contributing the lion's share of the tax money, as a great percentage of their income is taxed at the highest tax bracket, 35% or more.

New Jersey and Connecticut also rank high on the list for this reason. Many citizens from these areas commute into New York.

You'll note similar contributions amongst Massachussets (Boston, a large financial center), Illinois (Chicago). Then note poor states who are suffering most from economic troubles, Michigan's unemployment in the Detroit area pulls it down to one of the biggest drags.

Wage index also plays a huge role here. The states at the top of the list are high wage index states. An accountant coming out of college may start at 60K in NYC, and 40K in the south. Note the presence of South Carolina, Kentucky, Alabama, Mississippi, and Georgia near the bottom of the list. Cost of living in these areas is some of the lowest around, resulting in lower wages, resulting in lower taxes paid.

Florida is indeed an anomaly because of the retirees. They don't pay taxes on the social security checks they're drawing.

It is important that people not interpret this chart, particularly the drag index, as an indicator of one state doing more than another to fund the federal budget. It is not attributable to anything the state or the citizens are doing, it is merely reflective of:

- The geography of high paying jobs - where are the lion's share located? Major cities.
- The cost of living (and as a byproduct, wage index) of each state.

Unless you're a believer in a flat tax, one should expect New York to contribute more taxes on a per capita basis than any other state, simply because they make so much money. And it should be no surprise that California pays more than most states in taxes. They have way more people than most states and plenty of urban centers with high paying jobs, not to mention a booming tourism industry.

Saden, a very valuable analysis would be to add mean household income by state to the report, and then calculate (Gross Tax Paid - Federal Aid Received) / (Population x Mean Household Income). This would show you the percent of income paid to the federal government, net of aid. I'd postulate that you'll see a much more even distribution amongst the states.
Social Security is taxed but its either capped or a lower % and you can thank Bill Clinton for that double taxation.

What if the congress had just taken the approx. 800Billion, and given every person over 16 (approx 240 million in 2008) 3333 dollars, not tax cuts, not spending programs, just a flat 3333 dollars. That would have been interesting. Some it would have been a windfall, some would have repaid loans, some would have invested, and still others would not have noticed that amount. but it all would surely have been a stimulus.

What if the congress had just taken the approx. 800Billion, and given every person over 16 (approx 240 million in 2008) 3333 dollars, not tax cuts, not spending programs, just a flat 3333 dollars. That would have been interesting. Some it would have been a windfall, some would have repaid loans, some would have invested, and still others would not have noticed that amount. but it all would surely have been a stimulus.
That would have been way too easy but then there would be no strings attached to the money and would not make any voters dependent on goverment programs (vote buying).

no exec pay capping either although they would have laughed at getting 3333.

That would have been way too easy but then there would be no strings attached to the money and would not make any voters dependent on goverment programs (vote buying).

Exactly. The last thing government wants to do is make the people independent of it.

Even if you did give every poor person $50,000 or a million, they would eventually wind up the same way they were before.

Median data is available from the census and is preferred due to the fact that it's not sensitive to extremes like mean. Also, I don't understand the formula you gave. Can you clarify?

The reason I chose mean was to get the math to work out right. Median represents the midpoint household income, but the mean reflects the skew caused by the extremely high earners. My whole point here is that contributions by state are indeed skewed by these high earners. It is those high earners that carry the New Yorks and Connecticuts into very high positions on the drag index. By including that skew in the formula by using mean, you'll see an even distribution amongst the states.

In terms of the math, do the following:

A) Add a column on the end labeled Gross Tax Net of Aid. The formula here is Gross Tax Contribution minus Federal Aid Received. This tells you what the state pays in to the Federal Government after netting out the aid they receive.

B) Add a second column at the end labeled Gross Income. The math is your population number times a Mean Household Income. (I suppose if it's easier to find GDP by state than Mean Household Income, you can use that instead of doing this part of the formula).

C) Add a third column labeled Ratio of Contribution to Income. For the calculation, divide the result of step A by the result of step B.

You'll see that the results of C show very similar %s from state to state. NY will still be a bit higher than the others, but it's a more meaningful stat, because it shows what % of their income is being turned over to Uncle Sam.

What if the congress had just taken the approx. 800Billion, and given every person over 16 (approx 240 million in 2008) 3333 dollars, not tax cuts, not spending programs, just a flat 3333 dollars. That would have been interesting. Some it would have been a windfall, some would have repaid loans, some would have invested, and still others would not have noticed that amount. but it all would surely have been a stimulus.

From an economic standpoint, the democratic argument is that too many people would save it. Which doesn't help give the immediate shot in the arm for creating jobs. To an extent they're right.

Consumer confidence is really low right now, which is always an indicator that people are afraid to spend money. They instead save it.

But eventually that money would trickle back into the economy and give us the economic boost. Some argue that doing it your way would be more efficient in the long run, and I think they're probably right. But it wouldn't get the immediate results democrats are looking for.

From an economic standpoint, the democratic argument is that too many people would save it. Which doesn't help give the immediate shot in the arm for creating jobs. To an extent they're right.

Consumer confidence is really low right now, which is always an indicator that people are afraid to spend money. They instead save it.

But eventually that money would trickle back into the economy and give us the economic boost. Some argue that doing it your way would be more efficient in the long run, and I think they're probably right. But it wouldn't get the immediate results democrats are looking for.

Well I'm not sure what part of the stimulas bill will hit the economey very fast with the bill passed. Heck 40% of it will not be spent until 3 years from now and another large portion does not really do much more then grow goverment. The actual building of schools, roads, etc.. is like only 10% of the entire bill but if your on welfair now don't worry more money is heading your way.

Well I'm not sure what part of the stimulas bill will hit the economey very fast with the bill passed. Heck 40% of it will not be spent until 3 years from now and another large portion does not really do much more then grow goverment. The actual building of schools, roads, etc.. is like only 10% of the entire bill but if your on welfair now don't worry more money is heading your way.

Well a significant portion of the bill comes in the form of tax credits. We'll see those when we file our tax returns next winter.

Also, what people fail to understand is that if you give people on welfare more money, they WILL spend it and spend it immediately. Forget whether you think that's fair or not, that's not the point, the point is the money gets spent, businesses do better as a result, and more jobs get created.

Well a significant portion of the bill comes in the form of tax credits. We'll see those when we file our tax returns next winter.

Also, what people fail to understand is that if you give people on welfare more money, they WILL spend it and spend it immediately. Forget whether you think that's fair or not, that's not the point, the point is the money gets spent, businesses do better as a result, and more jobs get created.
So, how many people are on welfare, and if they were given 3333, wouldn't that add up to quite a chunk of money going straight into the economy.

Also, a lot in the middle class would probably clear up any past due credits (I guarantee that's where mine would go) which would restore credit worthiness immediately (especially if followed with some sort of credit amnesty for a limited time period).

Finally, a lot of the savings would probably go into the stock market. It sure seems like a win win, i mean who would vote against the politician that could say" I put 3333 dollars in your pocket"