NEW JERSEY -- With Tax Day postponed to July 15 and states having received hundreds of billions of dollars in federal aid during the COVID-19 pandemic, personal-finance website WalletHub today released updated rankings for 2020’s Most & Least Federally Dependent States.
This report illustrates the extent to which states are independent economically. However, the oxymoron in this situation is that states with a higher level of federal dependence are likely to better handle the coronavirus pandemic, given that most relief has come from the federal government.
To identify the states that most and least depend on federal support, WalletHub compared the 50 states across three key metrics:
- Return on taxes paid to the federal government;
- Federal funding as a share of state revenue; and
- Share of federal jobs.
In terms of federal dependency, New Jersey ranks near the bottom in ROI on taxes paid (49th), federal funding as a share of state revenue (41st), and share of federal jobs (46th).
"New Jersey is the second least federally dependent state. This is because the state has high taxes, as well as a high GDP. New Jersey's return on taxes paid to the federal government is the second lowest in the country," WalletHub analyst Jill Gonzalez told TAPintoSPF. "In addition to this, the share of federal jobs is very low, just above 1%, and federal funding makes up less than 30% of the state's revenue."
"In itself, the fact that the state is economically independent is a positive thing. However, given the current coronavirus crisis, federal independence could mean that New Jersey is less equipped to handle the pandemic," Gonzalez added.
Federal assistance to states has come into the spotlight recently during the coronavirus pandemic, where some states have received far more money per case than others. For example, in the initial $150 billion given to states from the stimulus package, which was allocated by population, New York got less than $24,000 per positive case while Alaska received over $3.3 million. While the government has shelled out around $750 billion total to states during this crisis, it faces questions about whether the distribution has been truly equitable and efficient.
For years, Americans have looked at federal assistance programs with growing scrutiny, and under the current administration, the number of people dependent on government assistance was decreasing prior to the coronavirus crisis. Regardless of overall trends, though, it is clear that some states receive a far higher return on their federal income-tax contributions than others.
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