Following the pandemic years when the federal government flooded Connecticut’s coffers with billions in American Rescue Plan dollars, Connecticut is back down to the very bottom of the list when it comes to paying more to the federal government than it gets back, according to an annual report by the Rockefeller Institute of Government in New York.
The report, which analyzes the Balance of Payments (BOP) or how much residents in each state pay in federal taxes versus how much the state gets back for programs like Medicaid or federal contracts, found that Connecticut paid more to the federal government and got back less on a per capita basis than any other state in the nation, making it a “net donor state.”
In 2022, Connecticut residents on a per capita basis paid $20,460 to the federal government, but only saw returns of $15,551 leaving a total loss of $4,909 per person – the biggest loss in the country – and behind states like Massachusetts, Washington, and New Jersey. The average per capita BOP for all states was a positive $2,799, putting Connecticut more than $7,700 below average.
In total numbers, Connecticut ranked 45th in the country for BOP, with more populated states like New York, New Jersey, and California ranking lower.
The 2022 numbers, however, represent a sharp turnaround from the pandemic years of 2020 and 2021, when Connecticut and other similarly situated donor states, saw net positive payments from the federal government to combat COVID-related shutdowns.
In 2020, Connecticut saw a net positive of $14.6 billion come into the state from the federal government, and in 2021 saw a net of $4.9 billion, before dropping off again in 2022. However, according to the Rockefeller Institute’s 2022 report, despite the surge in pandemic funding in 2020, Connecticut was still at the bottom of the list for per capita funding.
Connecticut saw a net loss of $17.7 billion to the federal government in 2022 and has consistently been dead last for per capita BOP since the Rockefeller Institute began keeping track in 2015. In total, Connecticut has paid a net of $57 billion more to the federal government than it has received back, according to the report.
In some ways, it’s good news for Connecticut, showing that the state has a lower share of residents at “high risk of social vulnerability,” according to the report, which noted 18 percent of Connecticut residents were high risk, while 40 percent of the state was low risk. However, it also means that Connecticut has a very high-income inequality measurement, only behind New York.
Connecticut’s concentration of wealth makes it a donor state either near or at the bottom of the list; the payments going to the federal government are primarily in the form of personal income and employment taxes. The report notes that the top 1 percent of taxpayers in 2021 earned 26.3 percent of total adjusted gross earnings and paid 45.8 percent of all federal income taxes.
However, in their analysis, authors Lynn Holland and Patrick Schumacher wrote that because New York has a similarly high concentration of wealth, that the federal pandemic aid may have been a more accurate and equitable reflection of the needs of the state and its population.
“The results for 2020 and 2021 confirm that the Federal emergency spending programs designed to address the economic impact of COVID-19, comprised in large part of direct payment to individuals, represented a more equitable distribution of aid—one more commensurate with the size of the state’s population and need—than those that have been used in the recent past,” Holland and Schumacher wrote. “However, the 2022 results confirm that the auspicious impact of these programs proved to be only temporary.”
Virginia and Kentucky were among the top three states getting back more than they pay into the federal government on both a total and per capita basis. According to the study, states with high numbers of federal contracts or high poverty rates tend to get more from the federal government than they pay.
“Kentucky benefits from a disproportionately large volume of Federal contracts,” Holland Schumacher wrote. “Other dark-shaded states have relatively high poverty rates and receive considerable Federal spending under Medicaid and other social welfare programs.”
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That Rockefeller report left out (or did I miss it?) one important fact: the sum of all those 2022 revenues by state came to $4,618,236 in millions but the sum of all expenditures for each state was $5,503,711, also in millions. That meant that $885,475, in millions, was paid to the states from money that hadn’t come in – it was borrowed, apparently. Let me write that out not in millions, but in dollars: $885,475,000,000. Almost a trillion dollars. The institute’s analysis was more of a “how did NY do as compared to other states”, and completely ignored the question of where did the government get the money that it spent. Perhaps they could add a column or two that would indicate New Debt per capita.
Kudos to Mr Crowe. He nailed it. As I read the story, my thoughts were: how could more money be sent to the states from the federal government than came in from those states? The answer is, of course, it was derived from new debt, money borrowed from those individuals and institutions investing in the United States multi trillion dollar bond offerings. And the national debt just continues to expand, currently $35 trillion, with no end it sight.