Comparative Federal Tax Contribution by State

[saden1]

I had some free time last night and I put together a spreadsheet that does some analysis on Federal Taxes paid by each state. This analysis looks at the percentage of population by State as it relates to percentage of Federal Income Taxes paid to determine whether a State pays its fair share of the Federal Income Tax. Think of it this way, if we all went out for drinks every Friday which one of us isn't paying their fair share of the tab? Whether you don't think you should pay at all or your beer should cost less because we should be drinking cheap beer is a different story.

A Drag Index (DI) is assigned to each State that is calculated based on the percentage of total population that live in the State, percentage of total taxes paid by individuals in the state, and percentage of total effective taxes paid. A lower DI indicates that a State does not pay its fair share of Federal Taxes while a larger DI indicates that the State pays its fair share or more of the tax burden. Note that even though Puerto Rico and District of Columbia are not States they were included in this analysis because individuals that inhibit these territories also pay Federal Taxes.



A few things to note:

1. Puerto Rico gets more aid than taxes it pays (negative effective tax rate of -0.07%).
2. New York is the most generous tax contributor.
3. Washington D.C.residents pay the most taxes per capita at ~35K per person.
4. Alaska has the second worst effective tax rate at 0.07%.
5. Florida has nearly the same size of population as New York yet pays 100 billion dollars in less taxes. One possible explanation for this anomaly is the presence of significant number of older people in Florida who don't pay as much taxes.
6. Wyoming is the most effective tax payer with 0.87 DI followed by Washington State with 4.94 DI.
7. California is the biggest tax contributor with roughly 10% effective Federal Taxes. That's more than the bottom 27 States combined even though the combined population of the bottom States is ~57 million.

Questions and feedback are welcomed and encouraged.

Here's the spreadsheet.