“Pro-Growth” Policy Produce Poor States

Red State Blue State Rich State Poor StateThe Tax Foundation has put together a great map that looks at how much of each state’s total operating budget comes from federal government aid. But before we get to it, let me lay out a few things. One is that it is not exactly fair that states are compared in this way, because people move. For example, a man might work his whole life in California and then retire in Arizona. Thus, it looks like California is subsidizing Arizona, but at least in the case of this man, California has gotten credit for paying taxes and now Arizona looks like a “taker” when this man is just getting a return on taxes he paid in California. So a lot of this business about certain states taking more from the feds than they give is about the age of the population.

But that isn’t the only thing that is going on. It is also the case that natural resources matter. The bottom two states in terms of taking money from the feds are fossil fuel states. Hawaii is also at the bottom—tourism, perhaps? But this does highlight the fact that federal dollars flow to states that have a lot of poor people in them. So keep this in mind when you look at this graph, Federal Aid as a Percentage of State General Revenue, Fiscal Year 2012 (click over to get the full graph at much higher resolution):

Federal Aid as Percentage of State Revenue - 2012

The top state in terms of getting federal money is Mississippi, which gets almost half of all its revenue from the federal government. Yet it is one of the youngest states. But let’s face it: it’s poor. I don’t mind my tax dollars going to help those people out. But it is also a bright red state. So how does that affect the way the state government has decided to tax its people? In a word: unfairly. There is a great deal of really useful information in another publication of the Tax Foundation, Facts and Figures 2014. Mississippi gets 27.5% of its state revenue from property taxes. This is even less than California (28.9%), which has a real problem with under-taxing property (primarily by allowing property to stay under assessed). They get only 3.8% from corporate taxes, compared to 5.2% in California. And they get only 15.1% from income taxes, compared to 27.3% in California. The real tell is the sales tax—you know, the tax that really hits the poor. Mississippi gets a whopping 32% of its state revenue from that tax—almost 50% more than California collects, and that’s with temporarily higher sales taxes to get us out of debt.

It isn’t just Mississippi. In all the red states, we see the same things: low income taxes, low corporate taxes, low property taxes (although not always), and high sales taxes. These are very Republican supposedly pro-growth policies. But if they really were good for the economy, why is it that these red states are so poor? I mean, other than the fossil fuel states that would be rich regardless of their policies. It seems that the supposed pro-growth policies are really just pro-redistribution of income from the poor to the rich.

So I don’t think we should focus on the fact that Mississippi takes a lot more money from the federal government than it gives. We should focus on the fact that the people of Mississippi keep electing governments that take from the poor and give to the rich—all in the name of improving the economy. But the economy never improves. They just depend more on the federal government. You know, the government they claim to hate.

H/T: EJ Dionne

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About Frank Moraes

Frank Moraes is a freelance writer and editor online and in print. He is educated as a scientist with a PhD in Atmospheric Physics. He has worked in climate science, remote sensing, throughout the computer industry, and as a college physics instructor. Find out more at About Frank Moraes.

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