This article by Mark Skidmore provides an examination of United States federal fund transfers to each of the 50 states and the District of Columbia (DC) net of federal taxes from each jurisdiction. Every year, the federal government expends funds, which are distributed across the country. These funds are transferred via direct benefits to individuals, grants to state/local governments, procurements to private entities and state/local governments, and for federal employee wages and salaries in each state and DC. This study summarizes federal government expenditures to each state and DC net of federal tax revenues paid from each state and DC. The difference between federal expenditures and tax payments is referred to as the balance of payments. The article shows that there are four key determinants of balance of payments: military spending and the proportions of the population that live in poverty, are elderly, and are disabled. According to the analysis, if the US had maintained the 12.5% average disability rate in 2010, the net balance of payments would have been about 35% lower than it was in 2022. Given a projected deficit of $1.5 trillion in 2024, a reduction in the balance of payments of 35% translates to a $530 billion reduction in the federal deficit annually, resulting from a $319 billion decrease in expenditures and a $212 billion increase in tax revenues.
State-by-State Analysis of Federal Government Transfers Net of Taxes Paid | Published in Journal of Regional Analysis & Policy (scholasticahq.com)