Kentucky Doesn't Pay Even Close To Its Fair Share Of Taxes. What Should We Do About That?

Kentucky's delegation to Congress includes two Republican senators, Mitch McConnell and Rand Paul, plus 6 members of the House, 5 Republicans and one Democrat: James Comer (R), Brett Guthrie (R), John Yarmuth (D), Thomas Massie (R), Hal Rogers (R) and Andy Barr (R). With the exception of Yarmuth, they all have something in common: an often-stated desire to shrink the federal government and reduce taxes. It has a lot to do with how easily them win elections. Kentucky voters also want to shrink the federal government and reduce taxes. They're idiots who don't know how good they have it and would likely suffer mightily if the federal government did shrink.

Paul Krugman was ruminating on this for his NY Times column Monday, writing about the various states' federal 'balance of payments'-- "the difference for each state between what the federal government spends in that state and what it gets back in revenue." I bet you can guess where this is going by now. "The pattern," wrote Krugman, "is familiar: Richer states subsidize poorer states. And the reasons are clear: Rich states pay much more per person in federal taxes, while actually getting a bit less in federal spending, because Medicaid and other 'means-tested' programs go disproportionately to those with low incomes. But the magnitudes are startling. Take the case of Kentucky. In 2017, the state received $40 billion more from the federal government than it paid in taxes. That’s about one-fifth of the state’s G.D.P.; if Kentucky were a country, we’d say that it was receiving foreign aid on an almost inconceivable scale." McConnell and his colleagues manipulate a system for their Moocher State.

Wondering about your own state? The Rockefeller Institute of Government has all the numbers. The taxpayers of just 10 mostly very blue states-- New York, New Jersey, Massachusetts, Connecticut, Illinois and Washington, North Dakota, Colorado, Nebraska, and New Hampshire-- fund all the rest of them. Who are "what Republicans call the takers, not the makers?" Well... the biggest moochers are, basically, the Old Confederacy and the heart of Trump country. Two states get great deals because of their proximity to DC and all that federal money that gets spent there: Virginia and Maryland. Virginia has an even more favorable balance of payments than Kentucky and Maryland is almost tied with Kentucky. These twenty-one states aren't even coming close to paying their fair share-- from bad to worst (The color-coding is simple. States in red voted for Trump; states in blue voted against Trump):

• West Virginia- $13,225,000
• Arkansas- $15,264,000
• Oklahoma- $15,668,000
• Indiana- $15,727,000
• Louisiana- $17,730,000
• New Mexico- $18,149,000
• Mississippi- $20,53,000
• Georgia- $23,501,000
• Tennessee- $24,115,000
• Missouri- $24,144,000
• Michigan- $24,648,000
• South Carolina- $25,162,000
• Pennsylvania- $29,435,000
• Arizona- $31,085,000
• Ohio- $32,062,000
• Alabama- $32,630,000
• North Carolina- $34,495,000
• Maryland- $36,524,000
• Kentucky- $40,733,000
• Florida- $45,886,000
• Virginia- $87,253,000

The takers are being subsidized by the makers in New York, New Jersey, Massachusetts, Connecticut, Illinois, Washington, etc. Bunch of welfare bums! They better hope that AOC and her colleagues agree to keep funding their sorry asses.

The findings are clear: New York’s residents and businesses-- which consistently send more revenue to the Federal government than any other state-- continue to contribute more in taxes than the state receives back in Federal spending. Key findings from this year’s report include:

• Preliminary analysis of 2017 data indicates that at -$35.6 billion, New York’s overall balance of payments remains the least favorable of any state in the nation. New York maintains its rank from 2016 (-$38.6 billion).
• New York’s shortfall in 2017 is nearly as large as that of second-ranked New Jersey (-$21.3 billion) and third-ranked Massachusetts (-$16.1 billion) combined. Connecticut and Illinois round out the list of the states with the least favorable balances.
• The state’s per capita balance of payments, -$1,792, continues to rank the state as one of the least favorable in the nation. New York’s negative per capita balance of payments is less than all but three other states. This is only a very slight improvement over 2016, when New York ranked the third to last with a per capita measurement of -$1,946.
• New Yorkers’ per capita difference between payments made to the Federal government and spending grew slightly to $3,717 more than the national average in 2017 of a positive $1,925.
• Since 2016, the US per capita balance of payment gap has grown by $202, reflecting an increase in Federal spending relative to tax revenue. New York has seen an improvement of $155.
• While New York’s balance of payments has improved, it has not kept pace with the national average. New York’s shortfall compared to the national average continues to expand.

The Federal Tax Cuts and Jobs Acts of 2017 will have a significant impact on high-income earners in New York beginning in 2018, with changes that are expected to have flow-through effects on state tax burdens in New York. What remains less clear for the impact on New York-- and its balance of payment calculations-- is the potential for Federal spending cuts that may be enacted to absorb expected revenue losses and the extent to which those cuts would impact New York. States will be affected very differently depending on the nature of these changes.

Even if the overall distribution of tax burdens and Federal spending does not change dramatically, understanding how the Federal Budget is distributed across the nation and how that distribution has changed over time offers critically important information when evaluating the fairness and appropriateness of proposed changes in fiscal policy.