State return on federal taxes
Once the beneficiary of federal largesse, Massachusetts is now on the losing end of the tax-and-spend game. For every tax dollar sent to Washington in fiscal year 2000, the Bay State gets back only 86 cents in government services and contracts, according to a study by the Washington, DC-based Tax Foundation (www.taxfoundation.org). A decade ago, the state received $1.08 from the feds for every tax dollar.
One reason for the decline is a drop in defense contracts. According to a similar study by the Northeast-Midwest Institute (www.nemw.org), the Bay State’s share of total Defense Department spending fell from 4.3 percent in 1990 to 2.5 percent in 2000. Still, the state’s poor rate of return overall is not because it gets so little–think Big Dig–but because it pays so much. According to the institute, the Bay State ranks 14th in per-capita federal spending, raking in $6,430 per resident in fiscal 2000. The trouble is that Massachusetts, with a relatively affluent population, ranks third in per-capita federal tax burden, paying out $9,196 per resident that year. (Indeed, these figures suggest that Massachusetts gets back only 70 cents on the dollar, but the Tax Foundation factors in federal spending that benefits all states without flowing to any one of them, such as payment on the national debt.)There is a case to be made for shifting resources from wealthy states to poor ones. For example, New Mexico, which gets back more than twice the tax dollars it sends to Washington, also has the highest poverty rate in the nation (followed by Louisiana and Arkansas). But the federal wealth transfer seems to benefit only rural areas: None of the 10 most populous states made it into the top half of the Tax Foundation’s tax-and-spend ranking, even though many of them have high poverty rates. Most states (31 of them) get at least as much from the federal treasury as they put in, but most people (162 million out of 281 million) live in a state that gets shortchanged.
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|State||State||Spending Per Tax Dollar, 1990|
Source: The Tax Foundation, based on federal expenditure data from the US Bureau of the Census.