Return on Statehood: How Much Value Every State Gets From the Federal Government

By  
  |  
By  
  |  

Featured Experts

As Americans head to the polls — or the mail-in ballot drop boxes — voters will weigh in on their own state's financial health based on who they elect in state, local and federal elections.

To put states' financial health — and the potential impact on residents of those states — into context, MoneyGeek analyzed and ranked states according to their dependence on the federal government. Rankings account for political affiliation, net benefits individuals and organizations in the state receive, state government revenue from federal sources and GDP per capita. We also examined which states received the most in child tax credits — both in terms of the annualized total amount and amount received per capita.

Key Findings:
  • Eight of the 10 states most dependent on the federal government were Republican-voting, with the average red state receiving $1.35 per dollar spent.
  • Nine states sent more to the federal government than they received — seven of these were Democrat-voting and had higher per capita GDPs than many of the red states that received the most.
  • New Mexico had the highest return on federal spending of any state ($4.33), and Delaware had the lowest ($0.63).
  • The eight states receiving the highest child tax credit per capita were all Republican-voting.

Federal Dependency Rankings by State

To find the states in the U.S. that were most dependent on the federal government in 2021, MoneyGeek analyzed the return on taxes sent to the federal government and the percent of each state’s revenue provided by the federal government. We also compared states by political affiliation and per capita GDP to learn more about the factors that contribute to federal dependency.

State Federal Dependency Ranking
Rank
State
Political Affiliation
Dependency Score
Return on Tax Dollars
Fed Fund % of State Revenues
GDP (in $M)

1

New Mexico

Blue

100.0

$4.33

25.94%

$401,241

2

West Virginia

Red

89.9

$3.74

27.18%

$294,837

3

Mississippi

Red

82.5

$3.40

27.10%

$456,802

4

Alaska

Red

81.1

$3.19

28.64%

$200,987

5

Montana

Red

62.0

$2.25

29.23%

$205,955

6

Kentucky

Red

54.5

$2.05

27.77%

$840,097

7

Alabama

Red

53.8

$2.46

23.32%

$899,482

8

Arizona

Red

52.5

$2.30

24.35%

$1,489,844

9

Louisiana

Red

52.2

$1.81

29.07%

$967,963

10

Vermont

Blue

45.4

$1.97

24.40%

$131,187

11

Maine

Blue

44.2

$2.31

20.42%

$264,784

12

District of Columbia

Blue

39.9

$1.78

23.78%

$574,131

13

Wyoming

Red

39.0

$1.58

25.32%

$144,966

14

Oklahoma

Red

36.6

$2.02

19.78%

$746,325

15

Hawaii

Blue

36.5

$2.49

15.14%

$359,425

16

South Carolina

Red

35.3

$2.17

17.76%

$966,755

17

Arkansas

Red

31.4

$1.09

26.66%

$516,296

18

Idaho

Red

30.4

$1.75

19.73%

$336,129

19

Michigan

Blue

29.9

$1.45

22.46%

$2,063,713

20

South Dakota

Red

28.9

$1.65

19.96%

$219,409

21

Indiana

Red

26.3

$1.23

22.99%

$1,490,547

22

Maryland

Blue

24.4

$1.51

19.34%

$1,690,905

23

North Dakota

Red

23.9

$1.83

15.90%

$216,132

24

Oregon

Blue

23.9

$1.51

19.11%

$1,001,834

25

Pennsylvania

Blue

22.3

$1.15

21.91%

$3,120,704

26

Rhode Island

Blue

21.2

$1.13

21.65%

$240,899

27

North Carolina

Red

20.6

$1.27

19.97%

$2,344,545

28

Virginia

Blue

20.3

$1.91

13.50%

$2,207,041

29

Wisconsin

Blue

18.9

$1.23

19.55%

$1,354,713

30

Missouri

Red

18.7

$1.14

20.40%

$1,286,835

31

Nevada

Blue

18.0

$1.45

17.00%

$690,391

32

New Hampshire

Blue

17.0

$1.34

17.65%

$340,437

33

Connecticut

Blue

16.6

$1.30

17.81%

$1,123,601

34

Tennessee

Red

15.7

$1.17

18.67%

$1,457,944

35

Ohio

Red

14.2

$0.90

20.71%

$2,700,149

36

Georgia

Red

14.1

$1.23

17.46%

$2,476,960

37

Iowa

Red

14.0

$1.43

15.37%

$770,841

38

Texas

Red

13.5

$1.20

17.47%

$7,038,938

39

Florida

Red

10.7

$1.15

16.60%

$4,383,553

40

New York

Blue

10.3

$0.93

18.65%

$6,796,179

41

Massachusetts

Blue

10.2

$0.88

19.10%

$2,336,156

42

Colorado

Blue

8.8

$1.14

15.85%

$1,560,395

43

Utah

Red

8.1

$1.12

15.74%

$779,943

44

California

Blue

8.0

$1.00

16.92%

$12,367,486

45

Delaware

Blue

7.6

$0.63

20.39%

$302,050

46

Kansas

Red

6.6

$1.24

13.88%

$693,193

47

Illinois

Blue

5.9

$0.94

16.54%

$3,454,067

48

Minnesota

Blue

3.2

$0.85

16.17%

$1,497,407

49

Washington

Blue

1.6

$0.94

14.54%

$2,474,820

50

Nebraska

Red

0.8

$0.93

14.33%

$515,235

51

New Jersey

Blue

0.0

$0.78

15.43%

$2,476,244

Red States Lead With Federal Dependence

Democratic-voting blue states tend to be wealthier and pay more to the federal government than they get. In contrast, Republican-voting red states tend to have less wealth and receive more federal government funds than they pay. In the MoneyGeek rankings, 8 of the 10 most dependent states are considered red states.

Policy choices may partially explain this relationship.

"A really conservative state might choose to tax itself at a lower rate, which means by default, they can give fewer state-funded services," explains Kathy Fallon, human services practice area director at Public Consulting Group. "That can exacerbate the situation."

But a correlation between states' economic health and political affiliation may reflect economic factors beyond those explained by political philosophy.

"If red states pay less in taxes than they receive in benefits, that's because they are generally poorer and program rules are progressive — not because they are 'takers' while blue states are 'donors' in any value-laden sense," says Mark Shepard, assistant professor at the Harvard Kennedy School of Government and faculty research fellow at the National Bureau of Economic Research (NBER).

Higher GDP Equals Less Federal Dependence

MoneyGeek analysis shows that states with higher per capita GDP are less dependent on the federal government.

"Higher-income states produce the majority of the tax dollars that go into the federal government's pocket," Fallon says. Because of the higher income, states and their residents need less support and use fewer federal dollars.

Fallon noted that tax code changes have made wealthy states' contributions more pronounced.

"Before, people who paid large state income taxes would deduct those from their federal tax payments," she says. Now, state tax deductions are capped. "Ironically, it means the wealthier states' populations are paying even more."

Expert Insights on Federal Funding Disparities

  1. Why do some states receive more federal funding than others?
  2. What role does federal funding play in state government finances?
  3. Is the current allocation of funding fair and equitable? Why or why not?
Dr. Nada Eissa
Dr. Nada Eissa

Associate Professor of Public Policy and Economics in the McCourt School of Public Policy, Georgetown University, and Research Associate at the National Bureau of Economic Research (NBER)

Kathy Fallon
Kathy Fallon

Practice Area Director / Human Services, Public Consulting Group

Dr. Aleksandar (Sasha) Tomic
Dr. Aleksandar (Sasha) Tomic

Economist and Program Director of Boston College's MS in Applied Economics Program, Associate Dean, Strategy, Innovation, & Technology, Woods College of Advancing Studies, Boston College

Child Tax Credits By State

MoneyGeek analyzed child tax credit data to learn more about which states received the most significant portion of this federal aid.

The states receiving the largest annualized child tax credit payments generally correlated with the state’s population: California received the biggest annualized child tax credit payment at $20,480 million, followed by Texas and Florida — the next two largest states by population.

However, demographics show that red states that have large families get the most money per capita for child tax credits. Iowa got the most child tax credit per capita, followed by Oklahoma, South Dakota, North Dakota and Tennessee — all Republican-voting states.

State
Political Affiliation
Annualized Child Tax Credit Payments ($M)
Child Tax Credit $/ Per Capita
Average Monthly Credit/Child

Alabama

Red

$2,835

$585

$256.96

Alaska

Red

$467

$518

$251.96

Arizona

Red

$4,183

$564

$254.65

Arkansas

Red

$1,821

$515

$257.45

California

Blue

$20,480

$461

$249.92

Colorado

Blue

$2,997

$571

$247.72

Connecticut

Blue

$1,679

$525

$244.15

Delaware

Blue

$523

$495

$253.46

District of Columbia

Blue

$269

$535

$245.08

Florida

Red

$11,094

$591

$255.10

Georgia

Red

$6,341

$558

$254.35

Hawaii

Blue

$779

$603

$253.52

Idaho

Red

$1,206

$566

$254.09

Illinois

Blue

$6,755

$518

$250.31

Indiana

Red

$4,030

$618

$255.59

Iowa

Red

$1,885

$728

$254.03

Kansas

Red

$1,745

$521

$253.61

Kentucky

Red

$2,631

$584

$256.85

Louisiana

Red

$1,378

$571

$128.14

Maine

Blue

$651

$478

$253.55

Maryland

Blue

$3,241

$512

$246.74

Massachusetts

Blue

$3,060

$592

$239.74

Michigan

Blue

$5,394

$595

$253.39

Minnesota

Blue

$3,252

$527

$248.27

Mississippi

Red

$1,848

$624

$258.46

Missouri

Red

$3,517

$594

$254.39

Montana

Red

$601

$296

$254.40

Nebraska

Red

$1,238

$631

$253.58

Nevada

Blue

$1,784

$605

$257.63

New Hampshire

Blue

$634

$476

$245.33

New Jersey

Blue

$4,596

$519

$242.70

New Mexico

Blue

$1,202

$568

$257.91

New York

Blue

$9,783

$575

$249.99

North Carolina

Red

$5,852

$532

$254.38

North Dakota

Red

$464

$637

$251.73

Ohio

Red

$6,587

$594

$254.12

Oklahoma

Red

$2,447

$656

$257.31

Oregon

Blue

$2,122

$561

$251.57

Pennsylvania

Blue

$6,654

$484

$250.51

Rhode Island

Blue

$522

$466

$251.36

South Carolina

Red

$2,922

$461

$255.77

South Dakota

Red

$560

$637

$254.19

Tennessee

Red

$3,909

$631

$255.82

Texas

Red

$18,567

$540

$254.27

Utah

Red

$2,382

$570

$251.77

Vermont

Blue

$296

$535

$253.11

Virginia

Blue

$4,593

$501

$247.25

Washington

Blue

$4,017

$529

$247.95

West Virginia

Red

$929

$555

$256.87

Wisconsin

Blue

$3,182

$435

$252.90

Wyoming

Red

$348

$390

$254.38

Take Action in Your State

Taxes may be one of life's only two certainties — along with death — according to writing attributed to Benjamin Franklin. But how much you pay in taxes and what you get for your tax dollars can vary greatly depending on where you live.

Suppose you're in a state that provides net contributions to the federal government and, therefore, to other states. In that case, you may consider whether your policy priorities are reflected in how the federal government spends and distributes that contribution.

If your state receives more than it contributes, you might examine the role the federal government plays in the day-to-day life of your state. Educate yourself, decide how you feel about how your state budgets and spends money and show your approval or disapproval at the polls when you vote. No matter how divided the nation feels politically, states remain interconnected economically, bound to each other through tax contributions and receipts. Participating in the process and voting ensures that your voice is heard at the state and national level.

Methodology & Data Sources

When evaluating the states most dependent on the federal government in 2021, MoneyGeek created an overall score focused on two key metrics: return on taxes sent to the federal government and the percent of each state’s revenue provided by the federal government. This final overall score was converted to a 100-point scale.

To determine the return on taxes sent to the federal government, MoneyGeek utilized reporting by the Internal Revenue Service (IRS) to identify the amount of taxes paid by the residents and businesses of each state for individual income tax, business income tax, estate and gift taxes, unemployment insurance taxes and excise taxes. MoneyGeek then identified data from the Treasury Department on payments from the federal government to individuals and organizations within each state and calculated the monetary benefit provided by the federal government to each state relative to the amount of taxes provided by each state (Medicare payments were removed from this calculation as this information was consolidated to a handful of states). This metric was given a 3x weighting and converted to a 100-point scale for inclusion in the final score.

The percentage of each state’s revenue provided by the federal government was calculated using information on each state’s revenue sources collected by the U.S. Census. This metric was given a 1x weighting and converted to a 100-point scale for inclusion in the final score.

We defined each state as being red or blue based on its voting history in the past five presidential elections. States where the Democratic candidate won three out of the five elections were labeled as blue, and states where the Republican candidate won three out of the five elections were labeled as red.

To calculate the annualized child care tax payments by state, we analyzed the stated tax payments by state for July and August 2021 — the first two months of the program as announced by the Department of Treasury.

About the Author


expert-profile

Deb Gordon is author of The Health Care Consumer’s Manifesto (Praeger 2020), a book about shopping for health care, based on consumer research she conducted as a senior fellow in the Harvard Kennedy School’s Mossavar-Rahmani Center for Business and Government between 2017 and 2019. Her research and writing have been published in JAMA Network Open, the Harvard Business Review blog, USA Today, RealClear Politics, TheHill, and Managed Care Magazine. Deb previously held health care executive roles in health insurance and health care technology services. Deb is an Aspen Institute Health Innovators Fellow, and an Eisenhower Fellow, for which she traveled to Australia, New Zealand, and Singapore to explore the role of consumers in high-performing health systems. She was a 2011 Boston Business Journal 40-under-40 honoree, and a volunteer in MIT’s Delta V start-up accelerator, the Fierce Healthcare Innovation Awards, and in various mentorship programs. She earned a BA in bioethics from Brown University, and an MBA with distinction from Harvard Business School.


sources