Do States Send Money To Federal Government

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

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Dr. Aleksandar (Sasha) Tomic

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

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

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

Practice Area Director / Human Services, Public Consulting Group

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.

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