Comparative Federal Tax Contribution by State

[Schneed10]

Originally Posted by saden1

Median data is available from the census and is preferred due to the fact that it's not sensitive to extremes like mean. Also, I don't understand the formula you gave. Can you clarify?

The reason I chose mean was to get the math to work out right. Median represents the midpoint household income, but the mean reflects the skew caused by the extremely high earners. My whole point here is that contributions by state are indeed skewed by these high earners. It is those high earners that carry the New Yorks and Connecticuts into very high positions on the drag index. By including that skew in the formula by using mean, you'll see an even distribution amongst the states.

In terms of the math, do the following:

A) Add a column on the end labeled Gross Tax Net of Aid. The formula here is Gross Tax Contribution minus Federal Aid Received. This tells you what the state pays in to the Federal Government after netting out the aid they receive.

B) Add a second column at the end labeled Gross Income. The math is your population number times a Mean Household Income. (I suppose if it's easier to find GDP by state than Mean Household Income, you can use that instead of doing this part of the formula).

C) Add a third column labeled Ratio of Contribution to Income. For the calculation, divide the result of step A by the result of step B.

You'll see that the results of C show very similar %s from state to state. NY will still be a bit higher than the others, but it's a more meaningful stat, because it shows what % of their income is being turned over to Uncle Sam.