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04.04.11

States That Sponge Tax Dollars

As Democrats and Republicans battle over the budget, The Daily Beast crunches the numbers to see which states take more from D.C. than they send back—and which states get shortchanged.

The increasingly rancorous political wrangling over the federal budget has placed the federal government inching ever closer to a shutdown. Today’s Republican budget proposal, headed by Wisconsin Congressman Paul Ryan, includes fundamental changes to Medicare, Medicaid, and other federal government-sponsored programs administered by states—in all, the proposal has more than $4 trillion in cuts over 10 years.

With the national conversation centering on federal finance, we wanted to find out which states get the most and fewest federal dollars based on what they pay into the federal government’s coffers. Are proposed cuts to federal programs more likely to affect red states, or blue states?

Out of the 10 states that have benefitted most from federal money since 2007, seven sent their electoral votes to John McCain in 2008. Mississippi and West Virginia are at the head of the class—each take nearly $3 from Washington for each dollar they pay in taxes. At the opposite end of the spectrum, Delaware and Minnesota both get about 50 cents for each $1 they pay in federal taxes.

In terms of trends, President Obama’s native state has benefitted the most since 2007, with federal funds to Hawaii more than doubling since 2009. The smallest increase since 2007 goes to Ohio, which has seen its federal funds increase by just 5 percent.

The federal money is responsible for a slew of programs, including health care for low-income residents and the elderly, fisheries and conservation research, medical research, U.S. Department of Defense contracts, disaster relief loans, and wages for federal employees. For the nation, federal money to states increased from an average of $1.25 per tax dollar paid in 2007 to $1.75 in 2009, an increase of 40 percent—a direct result of the Great Recession (lower taxes, more need).

Gallery: Ranking All 50 States Based on Who Takes Most Tax Dollars

To figure out which states—and Washington, D.C.—are getting the most federal funds for their federal tax dollars, we looked at 2007 through 2009 data from the U.S. Census Bureau’s Consolidated Federal Funds Report and data from the Internal Revenue Service. Each state was scored for each year based on its ratio of tax dollars paid to the IRS, compared to federal dollars received against the average ratio for each year, and the three years were combined to determine the final ranking.

Researched by Clark Merrefield