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What would happen if blue states stopped paying for red states?

A recent Rockefeller Institute study makes clear how much money flows out of Democratic-leaning states into Republican-leaning ones.

The United States Capitol building
The United States Capitol building
REUTERS/Sarah Silbiger

At least one of the overall truths about the politics of red and blue states is rooted in a huge dose of hypocrisy.

If, as they generally claim, Republicans want the federal government to tax less, spend less and do less, a massive transfer of wealth and resources would flow from red (Republican-leaning) states to blue (Democratic-leaning) states.

Or, to put it more precisely, if the government taxed less and spent less, rich people and businesses predominantly in blue states would save a lot of money on their taxes, and poor people and businesses predominantly in red states would lose a lot of federal aid.

I rely for that paragraph on Paul Krugman’s latest column, which in turn relied on a just-released report by the Rockefeller Institute of Government, which found that blue states pay significantly more than their per capita share into the federal treasury, and red states get significantly more than their share of the benefit of how those taxes are spent.

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Why does that represent, as I said above, a huge dose of hypocrisy?

Republicans say they favor a smaller federal government, in line with general Republican fiscal philosophy, which favors both smaller government and greater respect for state autonomy or states’ rights.

Democrats are the ones always cheering on expansions of federal power and federal spending. Right? But residents of red states, as a group, get a whole lot more benefit of federal spending than do blue states.

The Rockefeller Institute’s deep dive into how the redistribution of resources via the federal budget affects each of the 50 states is full of interesting details. But the mega-finding, at least to my eyes, is that the big beneficiaries of this net transfer flows to red states (where more poor people live), while a significantly disproportionate share of the tax burden falls on blue states because that’s where more rich people live.

If, as Republicans generally say they want, Washington taxed less and spent less and allowed for more state-by-state autonomy, red states would lose, on net, gazillions in federal spending. And taxpayers in blue states would save, on net, gazillions in tax dollars.

Laura Schultz, executive director of research for the Rockefeller Institute, wrote up the results. The list of states that pay more than their pro-rata share into the federal treasury is overwhelmingly Democratic, that is to say blue. The list of states that benefit most per capita from federal spending is overwhelming red, that is to say, Republican, you know, the party that claims to favor lower taxes (perhaps especially on the rich) and less government spending in order to net more of what, in Republican rhetoric, is called freedom.

Over the past five years, the report finds, “New York taxpayers have given $142.6 billion more to the federal government than New York residents have received back in federal spending.” That’s the biggest gap of any state.

New York is a very blue state. It has given its electoral votes to the Democratic ticket in all of the nine the most recent presidential elections, including six of the last seven by more than 20 percentage points. In 2019, the last year covered by the Rockefeller report, New York received collectively $22.8 billion less in federal benefits than its taxpayers paid into the federal treasury. The rest of the list of top per capita tax-paying states is likewise dominated by blue states.

Very few blue states make the list of those receiving the most per capita benefits. (The exceptions are Maryland and Virginia, which are blue or blue-leaning states in federal elections, but which get many of those federal dollars because they surround the District of Columbia and contain many federal facilities that spend federal dollars, not because they have more poor people getting benefits.)

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But, other than those exceptions, the rest of the list of biggest beneficiaries is dominated by red states. The biggest winner in receiving more in federal spending/benefits than it pays in federal taxes is Kentucky, a Republican-leaning state, which leads the list in that beneficiary category and is the home of the U.S. Senate’s Republican leader Mitch McConnell (which might have something to do with all the federal taxpayer dollars flowing into the Bluegrass State).

The list of the seven states that, according to this analysis, made out the worst by this measure, paying much more in federal taxes than they receive in federal benefits, are all blue states including our own Minnesota in fifth place. The top four: Connecticut, Massachusetts, New York, New Jersey. All blue states.

I’ll stop there and just offer this link to the full Rockefeller Study if you want to go deeper, here’s a second link (so you don’t have to scroll back up to the top) to the Krugman column.