2018’s Most & Least Federally Dependent States

One big point of difference among state economies is the tax burden of the average citizen. This number varies greatly. But what are the reasons behind why some states tax their residents more or less?

If a state can afford not to tax its residents at high rates, there are multiple explanations. One is that their economic policies are sound and the state economy is doing well. But another is that the state gets disproportionately more funding from the federal government than states with harsher tax codes.

Americans have looked at federal assistance programs with growing scrutiny. According to a 2018 Rasmussen report, 61% of American adults think there are too many people receiving government financial aid. On the other hand, only 9% think not enough people are receiving funds. Regardless of overall trends, though, it is true that some states receive a far higher return on their federal income-tax contributions than others.

Just how big is this difference? And to what extent does it change our perception of state and local tax rates around the country? WalletHub sought to answer those questions by comparing the 50 states in terms of three key metrics. Read on for our findings, commentary from a panel of experts, and a detailed explanation of our methodology.

Main Findings

 

Most Federally Dependent States

Rank (1 = Most Dependent)	State	Total Score	‘State Residents’ Dependency’ Rank	‘State Government’s Dependency’ Rank
1	New Mexico	83.22	3	5
2	Kentucky	78.96	5	4
3	Mississippi	75.84	8	2
4	Alabama	71.86	4	13
5	West Virginia	67.83	6	16
6	South Carolina	67.81	2	29
7	Arizona	67.22	11	3
8	Alaska	64.16	9	10
9	Montana	63.80	15	6
10	Louisiana	58.91	34	1
11	Indiana	58.89	7	22
12	Oregon	54.35	25	7
13	Tennessee	54.30	21	8
14	Maine	53.70	14	18
15	Vermont	50.96	18	15
16	Missouri	49.23	31	9
17	Maryland	47.82	12	33
18	South Dakota	47.22	23	14
19	Wyoming	44.95	22	20
20	Oklahoma	44.75	19	26
21	Idaho	44.49	20	27
22	Arkansas	44.06	39	11
23	Pennsylvania	42.78	17	34
24	Georgia	42.57	32	17
25	Michigan	42.15	30	19
26	North Dakota	40.90	1	50
27	Ohio	40.56	47	12
28	Florida	39.79	26	25
29	Iowa	37.99	29	28
30	Texas	37.81	42	21
31	Rhode Island	37.75	38	24
32	Wisconsin	36.98	16	41
33	Washington	36.33	27	32
34	North Carolina	36.03	36	30
35	New Hampshire	35.57	37	31
36	New York	35.25	44	23
37	Nevada	34.17	33	36
38	Hawaii	33.65	10	48
39	California	31.44	43	35
40	Nebraska	28.09	46	37
41	Virginia	27.99	13	49
42	Connecticut	27.78	24	45
43	Utah	27.06	28	44
44	Colorado	26.55	35	43
45	Minnesota	25.28	40	42
46	Massachusetts	24.34	45	39
47	New Jersey	23.35	49	38
48	Illinois	22.53	48	40
49	Kansas	18.57	41	47
50	Delaware	14.97	50	46

 

Red vs. Blue States

Correlation Analysis

 

 

Ask The Experts: Making Sense of Funding Disparities

For further clarity on the problems contributing to federal-funding disparities, we talked to a panel of economics and public policy experts. Click on the experts’ profiles to read their bios and responses to the following key questions:

1. Should Federal resources be allocated to states according to how much they pay in federal taxes or should some states subsidize others?
2. What programs should be a state/local responsibility and what should be a federal responsibility?
3. What is the fairest way to redistribute federal resources back to the states?
4. Will the new tax code have a positive effect on the economy?

Methodology

In order to determine the most and least federally dependent states, WalletHub compared the 50 states across two key dimensions, “State Residents’ Dependency” and “State Government’s Dependency.”

We evaluated those dimensions using three relevant metrics, which are listed below with their corresponding weights. Each metric was graded on a 100-point scale, with a score of 100 representing the highest level of federal dependency.

We then determined each state’s weighted average across all metrics to calculate its total score and used the resulting scores to rank-order our sample.

State Residents’ Dependency – Total Points: 50

• Return on Taxes Paid to the Federal Government: Triple Weight (~37.50 Points)
  Note: This metric was calculated by dividing federal funding in U.S. dollars by IRS collections in U.S. dollars.
• Share of Federal Jobs: Full Weight (~12.50 Points)

State Government’s Dependency – Total Points: 50

• Federal Funding as a Share of State Revenue: Full Weight (~50.00 Points)
  Note: This metric reflects the proportion of state revenue that comes from the federal government in the form of intergovernmental aid.

 

The following metrics were included in the infographic above for context only. They represent subsets of federal funding and are reflected in the first two metrics.

• “Federal Contracts” divided by “IRS Collections”
• “Grants” divided by “IRS Collections”
• “Other Financial Assistance” divided by “IRS Collections”

 

Sources: Data used to create this ranking were collected from the Internal Revenue Service, U.S. Census Bureau, USAspending.gov, Bureau of Labor Statistics and Governing.com. Unless noted otherwise, the statistics underlying this report are from 2015 and 2016.

Community Discussion

Submit

Tom Tozer @tomtozer

November 7, 2018

Needs more data about which agencies are spending in each state. Article starts out "too many people get handouts" and then analyzes cash as a generic thing, but that cash could be spent on military bases, federal national parks, or welfare, but those are very different things. I don't think this is an honest portrayal of the economics.

Reply · Delete

Comment

@rstjames

August 17, 2018

This discussion puts everyone against one another. Having been a NY resident my entire life, and recently relocated to CA, I have always felt pillaged financially, to no fault of my own. Slaving away in NYC, fighting to survive, it is not easy for the majority of New Yorkers. So when Red States disparage Blue States, one in a blue state can't help but wonder, "what the hell are yall talking about?" Life is hard in a blue state, and we reap less from our government. Instead, we are fined via multiple tolls and extreme amounts of taxes at every turn. Are not blue state residents getting an unfair assessment in terms of 'entitlement'? Is it that hard for red state citizens to understand why blue state residents real over ignorant comments such as being deemed a welfare state, when, in fact, it is red states milking federal dollars from blue states? Our country is very peculiar, indeed. Our leaders pit us against one another to divert attention from the fact that our federal government's main priority is to ensure it's dominance over it's own populace, affording unscrupulous business practices free reign to enact white collar crime against its own citizenry, and using demographical differences as a scapegoat to mask their moral ineptitude.

Reply (1) · Delete

Curt Swanson @curts_5

October 5, 2018

All the more reason to return the bulk of the authority to the states. Ending federal overreach will resolve these disparages and create the incubator states that will eventually discover best policy as opposed to being enabled and encouraged for bad policy. Go to conventionofstates.com and see what you think, and sign the petition if you agree.

Reply · Delete

@

September 27, 2018

Abolish the federal income tax on Citizens. Levy a federal tax on individual States directly proportionate to their number of electoral votes and combined legislative representatives (congressmen + senators). If land can vote, land can pay taxes.

Reply · Delete

@

September 6, 2018

These "differences" have nothing to do with WELFARE!! If you read, it has to do with the amount paid in Fed. taxes, like in cities with large businesses. And, certain states have more FEDERALLY FUNDED THINGS like parks, reservations, military, etc.

Reply · Delete

@davidbass73

August 26, 2018

you can get caught up in the minutia but at the basic level of the problem is the politicians are jst getting paid. i believe most aren't aware enough to know the damage they do. they believe they're right. the big money that buys them do and thats the majority of the problem. eliminate the ability to get rich as a public official and our votes aren't bought policies and made to favor them while being sold as helping us. the stat that ceo's used to make 20-1 vs now at 312-1 is real and i'd start there. greed. that was bernie sanders entire platform in a nutshell. they pay lots of money for people to write policy and propaganda to make you believe socialist ideas are evil and bad because there's examples of socialism being bad. there's also examples of socialism being good. also ignoring that a free market has it's ups and downs too. we put a man on the moon and have examples of every system on earth through out history to pull from and create a system that addresses the bad and exemplifies the good but they don't want that

Reply · Delete

Comment

Nope Noppers @joshdestardi

July 5, 2018

This is funny because it doesn't discuss STATE funds to CITIES. Please do THAT comparison. There is a reason why the most states where people are leaving in droves are Democrat based.

Reply (3) · · Delete

@wilhelm_eric

December 11, 2018

@joshdestardi:. Again fast and loose with the facts. Here are the facts: http://www.pewresearch.org/fact-tank/2013/07/12/the-politics-and-demographics-of-food-stamp-recipients/

Reply · Delete

@wilhelm_eric

December 11, 2018

Most blue states saw an increase in population since the 2010 census. Typical low info red stater playing fast and loose with the facts.

Reply · Delete

@wilhelm_eric

December 11, 2018

New York, Massachusetts, New Jersey, Delaware, Colorado, California, Washington, Oregon, Minnesota, New Hampshire, Vermont and Connecticut all are blue states and all saw their populations INCREASE since the 2010 census. Again another red stater Trumpkin playing fast and loose with the facts.

Reply · Delete

Jack Hunt @jackhunt901

August 20, 2018

@joshdestardi: The key revelation of the comparisons is that aid not identified as "welfare" comprises the bulk of federal government spending. The federal spending and the tax code favor richer people. The federal income redistribution ( e.g. crop supports, military spending) helps the richer people in the poorer states.

Reply · Delete

Willy G @Willdebeast

July 31, 2018

Even better, do it by political party. Pew discovered that 2/3 of welfare recipients self-identify as democrats.

Reply · Delete

Comment

KEN FREDETTE @kenf

June 16, 2018

Red states tend to thrive on government handouts and conservative positions such as more spending for defense should begin to pay their fair share. Their dependency contributes little to our nation yet their economic model funnels relatively higher federal assistance their way. Let me suggest the following as an example of what might help red states get off the dole....
Take a state like Mississippi. Low wages and low taxes makes them ripe for inordinately large federal benefits such as the SNAP program. On the other hand, people from progressive states with higher minimum wages and overall household income pay more taxes and are less eligible for federal benefits. Why should progressive states that pay minimum wages of $10, $12 or $15 find more of their people less eligible for SNAP benefits while their taxes go to MS and other red states who pay their people such low wages. Do we really believe the car wash, the grocery store, the the Waffle House etc. shouldn\'t be paying a fair, living wage? In the meantime, progressive states tend to enjoy a better quality of life with more having healthcare and adequate nutrition and often a better education. So, lets give less food stamp dollars to states with low wages. Those states can raise their minimum wage and in doing so would contribute more state tax dollars and federal dollars for the programs and services they seek. It is time to end Red State welfare that thrives on low minimum wages. No more excuses.

Reply (4) · · Delete

@delaney_thomas

August 4, 2018

@kenf: well if the blue states did not have to subsidies red states then blue state taxes would be a lot more. Red states reject feeding and educating the poor Blue states provide healthcare for kids, they feed and educate the poor to give them a path out of poverty so that equates to higher federal dollars paid and the red states suck it up. If Mississippi was taken off the government dole that would have upwards of 57% poverty rate.

Reply · Delete

Willy G @Willdebeast

July 31, 2018

Mississippi is about 40% black and about 85% of all welfare going into Mississippi goes to blacks. Any other bright ideas? Look it up if you don't believe it. Develop an understanding of misleading statistics. Stay in school.

Reply · Delete

@amateur6

July 9, 2018

@kenf: \"it COULD be... isn\'t enough...\" Nice Straw Man there. But even your own hypothetical example is bad: 1M vs 1.5M ... if you were making 50% more than your neighbor was making, I think you\'d claim you were \"better.\" Regarding states \"hemorrhaging\" people, of USA Today’s top eight \"fastest shrinking states,\" three are blue (NY, CT, VA), four are red (MS, WY, IL, WV), and one is purple (PA). The highest of the blue states is less than one-quarter of one percent. Hardly \"hemorrhaging.\" \"Higher crime rates in Blue states [citation needed].\" Nice Trumpism: false claim with no source (or verb). Per capita, the 10 safest states (thanks to McKinsey & Company for the data): Maine, Vermont, New Hampshire, New Jersey, Idaho, Connecticut, Virginia, Rhode Island, Wyoming, Pennsylvania. Six blue, two red, two purple (PA and VA).

Reply · Delete

Nope Noppers @joshdestardi

July 5, 2018

Blue states, it\'s not because of \'higher wages\'. It\'s because they\'re already sucking as much tax money as they can from people. Also it\'s interesting there are no actual dollar amounts listed here to understand true differences in amounts. It could be Blue=1,000,000 and Red=1,500,000 Sorry, 500,000 isn\'t enough for any liberal to claim anything near a sense of \'hah, we\'re better\'. There is a reason why the top states hemorrhaging people to other states are mostly Blue states.... Lower cost of living in red states. Much higher cost of living in Blue states. Highest taxed states California 13.3% Oregon 9.9% Minnesota 9.85% Iowa 8.98% New Jersey 8.97% Vermont 8.95% District of Columbia 8.95% New York 8.82% Higher crime rates in Blue states.

Reply · Delete

Comment

David Freedman @3_14david

May 16, 2018

Hi - I like what you're trying to do, but have 2 points about your data presentation. 1) Wouldn't it make more sense to have 1 be "lowest" rather than "highest" as in your graphs 2) Please have some compassion for color-blind people (mostly men). For example, it's very difficult for me to match up the colors in the graph with those in the legend. If your doing these analyses in R and using ggplot2, you could add "+ scale_color_colorblind()" to your code.

Reply · Delete

Comment

@raybagnato

April 13, 2018

I'm no genius, but I'm smart enough to realize that the states who are more dependent probably have the lowest property taxes and are not as populated as other states. I moved from NY to SC in 2013. The quality of life is so much better where I am now and it's so much more inexpensive. As for the red state vs. blue state argument, red usually means lower taxes while blue means they come and rob you while you're sleeping.

Reply · Delete

Comment

@slowdave1

April 11, 2018

For state dependency, why would you count "return on taxes" (fed spending/fed taxes paid) as 37.5 pts and then "share of federal jobs" as the other 12.5 points? Federal jobs should be already accounted for in the first category, fed spending, so you've double counted that money, throwing off the analysis. Also, "share of federal jobs" is not detailed. Do you mean the percentage of all federal jobs that reside in the given state, or do you mean the percent of total jobs in the given state that are federal government jobs?

Reply · Delete

Comment

More Comments