Blue States Pay More, Get Less Than Red States
SEATTLE POST-INTELLIGENCER
P-I Focus: Red and blue and the color of money
Only five blue states are net recipients of federal subsidies; only two red states are net payers of federal taxes
Sunday, February 13, 2005
By ERIC SCIGLIANO
November's presidential election sparked a boom in amateur political geography. You remember the maps that flew like rumors of war over the Internet. First, there was the plaintive spectacle of the election outcome: the blue-tagged Democratic states clinging to the Pacific, Great Lakes and North Atlantic shores, beachheads of civilization wrapped around a vast red wilderness.
One version showed how closely today's blue states matched the free states and territories before the Civil War while the red matched Dixie and the slave territories. Another, weighted for population, showed the red and blue turfs nearly equal (just like the Bush-Kerry vote), with populous blue states such as New York and California swollen like balloons, squeezing the shriveled red strongholds of the Plains and Rockies.
Another showed the United States broken up, Yugoslavia-style, into the various cultural and ideological divisions that this election seemed to reflect: Cascadia, Dixie, Yankeeland. One even showed the blue states as southern arms of a "United States of Canada," with the red bloc renamed "Jesusland."
Even as they chuckled over these maps, blue Americans fumed in ways once reserved for Dixiecrat rebels, neo-Nazis fleeing to Idaho and other fringe separatists. You probably heard the grumbling; perhaps you even vented a little yourself. In 2000, you could blame the outcome on butterfly ballots, Ralph Nader and the "compassionate conservative" stealth campaign. But November 2004 offered fewer excuses, and it posed the question: What if a large section of this country really cares more about putting God in government, keeping gays out of marriage chapels and cutting rich folks' taxes than about fiscal, environmental and geopolitical sanity? What if what we've got is what they actually want? And what if the country's relatively liberal, cosmopolitan and secular regions are paying through the nose to be captives in a political madhouse?
Follow the money, in this as in all touchy issues. Regional inequities -- who pays and who gets -- go back far and deep in U.S. history. One-way taxation without representation made the colonies rebel against Britain; the fight over whether the slave-holding South or anti-slavery North would prevail in the Western territories led to the Civil War. Discontent has bubbled up since then, whenever this state or that region lands in disfavor for federal spending, taxes and tariffs. But it's reaching a new boil now, thanks to two trends.
One is the way that the newest federal pie, Homeland Security funding, has been divvied. The likeliest terror targets are blue coastal cities -- New York, Seattle, Los Angeles (where al-Qaida was stopped from striking in 1999) and underprotected seaports generally. But that's not where the money's gone. A stock formula allocates 40 percent of funding equally to each state. So Wyoming, Dick Cheney's off-and-on home state and about as tempting a target as Baffin Island, gets seven times as much funding per capita as New York. When Homeland Security responded to criticism by trying to place a little more money where it's actually needed, Republican lawmakers snarled about favoring "Democratic cities."
Homeland Security is just a small slice of federal spending. But the big picture looks the same. Each year the National Tax Foundation, a flat-tax society that could hardly be accused of liberal bias, tallies the federal taxes coming from each state and the federal expenditures going to each. Harvard's Taubman Center for State and Local Government does firmer tallies, from confirmed data, periodically; its last report goes back to 1999 data, but it jibes generally with the Tax Foundation's findings. And these findings are not what a lot of people expect.
"There's a general perception out there that the blue states are big net recipients of federal subsidies," says Harvard business professor Herman "Dutch" Leonard. And there's a corollary perception that, in contrast to these welfare-queen states, the inland and Southern states are a heartland of self-reliance and private initiative, less dependent on federal spending. As Leonard says, "That historically hasn't been the case." And it's becoming less and less so.
In 2003, the top subsidy-sucking state, in percentage terms, was red-lite New Mexico, which received $1.99 in federal money for every dollar it sent to Washington, D.C. All the next eight net recipients of federal spending were redder yet: Kentucky, Virginia, Montana, Alabama, North Dakota, West Virginia, Mississippi and Alaska, which received $1.60 to $1.89 back for each tax dollar.
The list of net losers in the state-federal exchange, by contrast, reads like a Who's Who of Blue. Two of the top 14 were traditionally red Western states that are starting to turn purple, Colorado and Nevada. The other 12 are all blue: California, Connecticut, Delaware, Illinois, Massachusetts, Michigan, Minnesota, New Hampshire, New York, Washington, Wisconsin and the biggest chump of all, New Jersey, where the federal government spends just $.57 for every dollar it collects. Clearly Tony Soprano did not negotiate this deal.
Only five blue states were net recipients of federal subsidies. Only two red states were net payers of federal taxes. Washington, despite its large military presence and big defense contractor The Boeing Co., received just 90 cents on its federal tax dollar. Oregon and swinging Florida are perfect washes: They received one federal dollar for every dollar they paid in taxes.
The reasons for those disparities are many. Military spending favors base-rich states such as Hawaii, by far the biggest per-capita net recipient among the blues. Crop subsidies favor Plains and Midwestern states (as well as California, which is nevertheless a big net payer to the federal government). Medicare and Social Security payments flow disproportionately to Florida, Arizona and other Sun Belt retirement meccas. Maryland, Virginia and New Mexico are big net recipients because of their outsized federal work forces (as is Washington, D.C., a special case that's off the charts).
But according to the Tax Foundation, the main reason so many blue states pay so much more than they get back is that their residents tend to earn more money and pay more income tax. William Ahern, the editor of the foundation's reports, argues that if blue-staters voted their self-interest, they'd join his group in supporting Bush's efforts to undo the United States' progressive tax structure and eliminate the Alternative Minimum Tax, a backstop designed to catch upper-income tax avoiders. And red-staters, who are less well off, would stop supporting Bush and instead defend the progressive taxation that favors them. Not likely, Ahern concedes: "It appears they'll follow President Bush wherever he leads them" while Democrats will "obey their instinct" and battle Bush.
But you can look at this topsy-turvy lineup another way. Blue-staters earn more on average and pay more in taxes, because they are better educated, more productive, less likely to be retired or disabled and generally healthier; rates of obesity, smoking and alcoholism (not to mention divorce and suicide) all peak in the South or West. The highly educated have always been healthier and earned more but more of them used to vote Republican; as the two parties have switched identities, these voters have gone Democratic.
What is not a factor, Ahern declares, is the greater political clout of the Republicans, who now control every branch of federal government for the first time since Reconstruction. But the numbers suggest that pork may play a part. The biggest recent losers in this sweepstakes, those whose balance of payments has improved most, tend to be red: Alabama, Alaska, Arkansas, Kentucky, South Carolina, South Dakota, Tennessee and Virginia. The biggest losers, those that are paying more and getting less, are blue: California, Massachusetts, Minnesota, New Jersey and New York.
Already, Republican Gov. Arnold Schwarzenegger has vowed to pry more federal money loose for Democratic California. You can bet House Majority Leader Tom DeLay and his posse, who have pressured K Street lobbying firms to hire Republicans rather than Democrats, look for ways to feed the red and starve the blue.
The results, when you crunch the fragmented state data, are striking. In 2003, according to the Tax Foundation data, the blue states contributed $966 billion to the federal Treasury and got $830 billion back. The reds paid $697 billion and received a whopping $909 billion. Welfare queens, indeed.
What if Red America and Blue America split up and each had to live according to its means? Secession talk is of course idle fantasy; a national breakup might be the only way to achieve the "humbler foreign policy" that candidate Bush promised in 2000, but it's a daydream that would prove a nightmare. Czechoslovakia and the Soviet Union could dissolve peacefully, but the United States would not; look what happened the last time a region tried to break away. Still, if the blue states could cut loose from the reds (granting the South the divorce it sought 144 years ago), they'd start out $136 billion to the good.
Originally Posted by Kristy
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