US taxing and spending

A good point was raised by Ayatola Hombre in his comments on my US GSP map: the GSP data (gross state product, an estimate for the value of goods and services produced in a state’s economy – I won’t go in the details of how this is calculated, check the wikipedia) isn’t necessarily correlated with the net in- or outflow of federal tax money for a given state. Not necessarily, but probably, was my belief.

So I went back to the drawing board in order to verify this and came up with data from the Tax Foundation, a nonpartisan educational organization. They base their numbers on data from the US Census Bureau and the US Bureau of Economic Analysis. The results are even more baffling than the GSP data:
Out of the 31 ‘red’ states (states that voted Bush), 26 states enjoyed a net inflow of federal tax money in 2003. Out of the 20 ‘blue’ states (states that voted Kerry), only 8 enjoyed a net inflow. Hence the total tax burden is carried by 5 red and 12 blue states, the top three being New Jersey, New Hampshire and Connecticut (all blue).

This shows again that the US may look very red on the election maps, but the economy – and wealth, and future – really is being carried by the ‘liberal’ states. Cash is flowing from blue to red, not unlike the Flanders-Wallonia situation in Belgium (an interesting paradox: Bush and the republicans play in this analogy the role of Di Rupo and the PS).
Some more info on the factors that affect the data, according to the Tax Foundation:

“Federal spending on defense and other procurement dollars are often funneled to the states of powerful Members of Congress, and state governments can grab more federal grant money by skillfully manipulating their spending to comply with federal regulations.

However, demography may be more influential than politics. States with more residents on Social Security, Medicare and other large federal entitlements are bound to rank fairly high. Similarly, the high spending levels in Virginia, Maryland and the District of Columbia are explained by the predominance of federal employees.On the tax side of the equation, states with higher incomes per capita—New Jersey stands out—pay much higher federal taxes per capita because of the income tax’s progressive structure. The citizens in these high-income, high-tax states do not always live better or save more than people in low-income, low-tax states because the cost of living is usually that much higher.”

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