The Mismatch of Federal Funds Among States

Some Are Givers, Others Are Takers

I have always assumed that in our federal system, money was generally allocated in a way that could be perceived as fair. I assumed that on a state by state level, what we pay in taxes was approximately equal to what we receive in federal funds. As it turns out, there are a few states that receive far more than their fair share, while others do not get enough! It's surprising to me that despite the disparity, not a lot of people seem to notice. The chart below shows the federal payback for every one dollar spent.

Whoa South Carolina!

For every dollar spent in taxes, South Carolina receives about $8 while Massachusetts receives less than $1. This seems crazy, but it is actually rather simple to explain. For decades in the 20th century, the south was run by Democrats and many Democrats in Congress gained seniority from decades long tenures and were able to earmark huge sums for their states. As a result, states like South Carolina and Louisiana receive tons of federal funds.

One caveat to this is that some federal funds are distributed unevenly because they have to be. Programs such as SNAP go to low-income families, and southern red states tend to have the most people in poverty and so they receive the most aid. But this only explains a part of the difference. 

Interestingly enough, Republican states that argue for shrinking the government and cutting spending actually receive the bulk of federal funds. Look back at the chart and notice that some of the most conservative states appear near the top but many of the most progressive states are near the bottom. So despite the fact that red states depict blue states as "takers," the reverse is actually true.