For 2005, the data shows that California ranked 43 in terms of getting back what it paid in federal taxes. Returns for the four best-treated states were, for New Mexico $2.03 received for each dollar sent to Washington, $2.02 for Mississippi, $1.84 for Alaska and $1.78 for Louisiana. Those states were followed by $1.76 for West Virginia, $1.68 for North Dakota, $1.66 for Alabama, $1.53 for South Dakota, $1.51 for Kentucky and $1.51 for Virginia.
Unfortunately there is no way to compare, dollar for dollar, how much a state gets from the federal government vs. how much its pays in federal taxes. Estimating the situation apparently is the best that can be done. IRS data for 2010 shows that gross payment to the IRS from California residents and businesses was $273.3 billion ($292.6 billion in 2012).2 That was significantly more than payments from any other state. Data from 2010 indicates that California residents received from federal programs about $4,459 per person3. With a 2010 population of about 37.3 million4, one can estimate that California received about $166.3 billion from the federal government in 2010. To account for the incompleteness of the 2010 data set, one can assume that payments back to California in 2010 were 25% higher than the $166.3 billion estimate, in which case California received back $207.9 billion of the $273.3 billion it paid in 2010. Obviously, if the correction factor for incomplete data is in error, then the amount California received in 2010 would need to be adjusted up or down accordingly.
Assuming the 2010 estimate is accurate, California received back from the federal government 76% of the proceeds it sent to Washington. That estimate is similar to the 78% return rate that the complete data set for 2005 showed. If the 2010 estimate is accurate, California subsidized spending in recipient states by about $65.4 billion. The RPCA is unaware of more accurate or more recent data than that discussed above.
Although many or most Californians may be pleased to subsidize other states like this, it makes sense to reassess this level of generosity. California has the largest economy and largest population of any state. It is therefore very important to the overall U.S. economy and the U.S. population as a whole. California is a major contributor to U.S. new technology and innovation, which is an important means to generate wealth and to defend our standard of living, which has been under attack for years. The entire U.S. has a vested interest in insuring that California's infrastructure, education system and general operations is world-class and fully funded. The question has to be asked if it makes economic sense to continue to starve the single biggest economic engine in the U.S. economy in return for benefits that cannot be readily quantified.
In RPCA opinion, this kind of gracious generosity no longer makes economic sense and is unsustainable. Maybe it never made sense. Some information suggests that California has may been a major subsidy donor for years.5 California's once world-class infrastructure is slowly degrading and it has been neglected for quite some time.6 Under the circumstances, the RPCA believes that it is in the best interest of California and the U.S. as a whole to bring federal spending in California in line with what California sends to Washington. In short, the RPCA is calling for parity in returning to California every tax dollar it sends to Washington.
Because of the complexity of budgeting and ongoing programs, the RPCA understands and is sensitive to the fact that attaining revenue and spending parity cannot be accomplished overnight. Federal budgets are complicated and shifting spending priorities needs to be made with care. Nonetheless, current spending priorities endanger America's economic growth and its competitiveness. In turn, that endangers America's national security. Given the urgency and seriousness of California's deteriorating status, the RPCA is calling for a shift to parity within 3-4 years. That is sufficient time to minimize damage to current spending programs, while providing a real prospect of meaningful relief to California in a reasonable period of time.
Although recipient states initially may resist this change in spending priorities, the RPCA is confident that on reflection, they will agree that it is in the public's interest to support this reorientation effort. The general attitude in many recipient states is fully in accord with the concept of self-reliance and limited government. For those states, this reorientation will no doubt have great appeal because it lessens local dependence on federal spending. That undeniably serves the public interest. It is hard to imagine any degree of opposition from such states once the fundamental bedrock principles are understood.
In addition, this provides a wonderful opportunity for other states who are so-inclined to step up and assume a leadership position in terms of generously donating assistance to states that are inclined to accept it. States that are now recipients may wish to repay the past generosity of others with future generosity of their own. When California does well, the rest of America also prospers. Moving toward tax and spending parity for California is clearly a win-win opportunity for all American stakeholders and the world at large.
To initiate the reorientation process, the RPCA has sent letters to all of California's senators and representatives asking them to begin a bipartisan, cooperative effort to begin the complex process of bringing California into a parity profile as soon as that can reasonably be done. The RPCA has every confidence that once this matter is brought to the attention of our congress members, there will be unanimous agreement that this will be a high priority for California going forward. The RPCA is contacting governor Brown and key state legislative leaders and other key politicians and groups to asking them to support this effort by conveying their support for parity to our congress members. A copy of the RPCA's letter is shown at footnote 7.
The RPCA urges all Californians to support this important and urgent project. Once parity is successfully in place, tens of billions in additional tax revenues will flow into California each year. Among other things, that will result in major improvements in California's infrastructure and education system over time. The best way to support this is to write to senators Feinstein and Boxer and the house member in your voting district. Contact information for our members of congress is at footnote 8. The RPCA further urges Californians to express their support to governor Brown and state political leaders, with their contact information shown at footnote 9.
Footnotes:
1. The quoted data is based on a 2005 analysis by the Tax Foundation. The Tax Foundation was founded in 1937 and describes itself as "the nation’s leading independent, non-partisan organization providing sound research and analysis on federal and state tax policy." These numbers appear to be fairly stable over time.
2. Internal Revenue Service gross collections (before refunds) by type of tax and state are reported in the fiscal year IRS Data Book, Table 5 (http://www.irs.gov/uac/SOI-Tax-Stats-Gross-Collections,-by-Type-of-Tax-and-State,-Fiscal-Year-IRS-Data-Book-Table-5; http://nationalpriorities.org/en/interactive-data/database/mashups/bod5cq0ad4ntvrkr/). Gross and net collections at the national level are reported in the IRS Data Book, Table 1. All IRS data tables are at: http://www.irs.gov/uac/SOI-
3. http://nationalpriorities.org/en/interactive-data/database/mashups/ufz9e7raolmod39z/.
4. http://usatoday30.usatoday.com/news/nation/census/profile/CA.
5. http://en.wikipedia.org/wiki/Federal_taxation_and_spending_by_state.
6. http://www.ocregister.com/articles/infrastructure-380794-california-public.html; http://www.caeconomy.org/reporting/entry/california-infrastructure-grades-are-in-needs-improvement; http://www.allgov.com/usa/ca/news/where-is-the-money-going/local-road-infrastructure-crumbling-in-the-age-of-austerity-130306?news=847273.
7.
8.
9.
taxing and spending by states
http://en.wikipedia.org/wiki/Federal_taxation_and_spending_by_state
National Priorities Project: http://nationalpriorities.org/analysis/2013/federal-spending-your-state-2012-2014/; http://nationalpriorities.org/en/about/contact/
federal tax dollar spending in CA: http://www.cbp.org/pdfs/2011/111117_How_Are_Federal_Dollars_Spent_pb.pdf
IRS tax data tables: http://www.irs.gov/uac/SOI-Tax-Stats---Historic-Table-2
census bureau keeps tabs on fed spending per state
http://taxfoundation.org/blog/monday-map-federal-aid-state-budgets
http://taxfoundation.org/article/federal-spending-received-dollar-taxes-paid-state-2005
http://www.politifact.com/truth-o-meter/statements/2012/jan/26/blog-posting/red-state-socialism-graphic-says-gop-leaning-state/
http://www.bloomberg.com/news/2012-09-19/blame-fdr-and-lbj-for-moocher-paradox-in-red-states.html
http://www.ritholtz.com/blog/2012/02/is-your-state-a-net-giver-or-taker-of-federal-taxes/
http://www.motherjones.com/politics/2011/11/states-federal-taxes-spending-charts-maps
http://visualizingeconomics.com/blog/2010/02/17/federal-taxes-paidreceived-for-each-state
http://www.slate.com/blogs/the_reckoning/2012/10/25/blue_state_red_face_guess_who_benefits_more_from_your_taxes.html
defense facilities map: http://www.google.com/imgres?imgurl=http://www.nrdc.org/energy/images/database_dod_facilities_graphic.png&imgrefurl=http://www.nrdc.org/energy/readgdb.asp&h=585&w=810&sz=287&tbnid=O0HEcnW9WlPR3M:&tbnh=90&tbnw=125&zoom=1&usg=__CNDJR7SAA_BC5sr5E5stvZT18Is=&docid=lzCK5uQ-6WIRiM&sa=X&ei=FN81UqznH6rSiwLQyYCoCg&ved=0CDUQ9QEwAQ&dur=2074
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