Tuesday, November 16, 2004

Red States vs. Blue States

A classmate wrote me the following email:
I read your post on the tax/spending distribution between red and blue states, and had to comment on it b/c it's a pet peeve issue of mine. Although I am a blue-stater who paid over six-figures in taxes last year, the claim that red states are fiscal leeches of blue states is, well, a red-herring.

The Tax Foundation -- which is the source for the stat that red staters take in more federal money than they pay in taxes -- lists three reasons why this disparity exists: http://www.taxfoundation.org/ff/taxingspendingupdate.html

(1) The main reason for this disparity is that the population is older in the red states (at least right now), and hence more red-staters receive Social Security and Medicare. Given that entitlements comprise the majority of the federal budget, it's not surprising that this is the main reason for the disparity. Twenty or thirty years from now on, it is quite possible that it will be the blue-states that have an older population and hence will take in more federal money than they pay in taxes.

(2) More defense bases are in red states than in blue states. But since the military protects all of us, it's not fair to somehow claim that the red-staters are leeching off the blue-staters.

(3) There are higher-income folks in the blue-states, so they pay more. But since so many high-income blue-staters are the ones who vote for politicians who will raise taxes on them, there's no basis for the complaint that blue-staters are getting the short end of the stick.


Anonymous Anonymous said...

Like your classmate, I find the claim that the blue states subsidize the red states hard to take at face value. He provided some good facts from the Tax Foundation. I'm a red-stater who has a fairly heavy federal income tax burden (but not as much as your classmate!), so I don't particularly like being called a freeloader by the blue-staters. Natually, I have to take issue! Here are some more thoughts on the issue.

According to CNN's exit polls (http://www.cnn.com/ELECTION/2004/pages/results/states/US/P/00/epolls.0.html
), there is a strong correlation between income and tendency to vote Bush. Now, since people who have high income tend to pay more in federal income taxes (we've all seen the figures - 50% of households pay 96% of all federal income tax), I believe it is a safe assumption (but not an absolute given) that there is a correlation between amount of federal income tax paid per household and tendency to vote Bush. So, it may be a meaningless measure to consider payments to/from red/blue states. California and New York (just to name a couple of blue states) have a lot of red counties. Could the federal income tax imposed on the residents in these counties account for some of that net loss in federal money? I'm speculating here that we may be seeing an effect similar to Bush winning the electoral college vote in 2000, but getting fewer popular votes than Gore. Perhaps on a "winner take all" state level, there is a net transfer from blue to red, but does this hold on the county level and individual level? I'm only speculating, not stating a fact.

Secondly, farms are mostly in the red states. Are farm subsidies included in these figures? I don't know how much they would account for federal payments to states, but everyone who eats food, red or blue, benefits from the lower food prices that results from these farm subsidies, so it would be unfair to count all of these subsidies as benefitting red states only.

Finally, what if the figures indicated that there was a net transfer of money from red to blue. Then what? Would that be okay? Unlikely. The Republicans are accused of being the party of the rich, so that situation would be perceived as an appropriate transfer of wealth, and the fact that the "richer" states voted red would only serve as "proof" that the rich are greedy and would prefer to avoid "paying their fair share." So regardless of which way the facts point, there is always an angle.

Kevin W

6:15 AM  
Blogger Dick Tatlow said...

Regarding Social Security payments to red staters:
An analysis of my payments into FICA, with the addition of 3 percent interest, provide a balance that will never diminish when payment cola increases are matched by similar increases in the account balance. In other words, the government earns money on my social security account.

1:56 PM  
Blogger Aaron said...

Why tack an irrelevant response on to an argument that should be a non-starter? Of course some states receive more than they contribute to the federal coffers, and some states receive less. Absent delusionally bad regulation or legislation, that's always going to happen, isn't it?

You can question the priorities which lead to some states getting an effective "subsidy", while other states are asked to provide that subsidy. But, given that to the best of my knowledge no nation has yet been so stupid as to force a "you only get what you pay" rule, it always happens.

They take a more honest approach to the subject in Canada, where it is taken for granted that the industrialized "haves" provinces will subsidize the "have nots", and managing that redistribution is one of the acknowledged roles of the federal government.

It is verging on imbecilic to suggest that states with no industrial base, many of which rely on significant subsidies for all of their significant industries, will turn around and subsidize the engines of the American economy. But perhaps if you can't think beyond the superficial, and are willing to grasp any available straw to "rebut" an argument that you are too stubborn or obtuse to recognize as fundamentally flawed, that's what happens....

10:20 AM  
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2:18 AM  
Blogger gooogleable said...

I'm sorry, but how is this a non-starter?
Blue state indignation comes from the facts that:
1. Red staters are hypocrites when they complain about the redistribution of wealth, while they themselves are leeches and the greatest benefactors of the redistribution of wealth.
2. red staters claim the moral high ground on a number of things, but if they can't even support themselves, they have no case.


7:12 PM  

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