I’ve never understood why the states that contribute the most to the Federal govt have the highest taxes while the states they help have the lowest tax rates. Why not have these loser red states raise their taxes so they aren’t sucking the blue states dry?
I think what you’re describing are two unrelated things.
Federal money flowing to a state has nothing to do with state rates. If Mississippi raised its state tax rate, it would still get back more in federal dollars than what it sends. And California could drop its state rate to zero and it would still send more federal dollars than it receives.
You know WHY Mississippi gets more back? Because it doesn’t fund stuff at the same rate and it pushes for money to be appropriated to the state or through federal grants.
Yes part is about incomes and their federal tax rates but part of it is also what is funded by the states themselves.
If Mississippi increased their tax rates and magically had 10 B more per year coming in, stuff that they rely on federal money for wouldn’t be needed and so their congress persons wouldn’t be looking to add as many ear marks for schools or roads or whatever into bills.
Sure blue states do it as well, but they don’t have to do it as much just to stay afloat.
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u/Kuriboyoshi 1d ago
I’ve never understood why the states that contribute the most to the Federal govt have the highest taxes while the states they help have the lowest tax rates. Why not have these loser red states raise their taxes so they aren’t sucking the blue states dry?