In 2022, the federal government spent $6.27 trillion1. Most of the government’s revenue comes from taxes collected from individuals and businesses across the U.S. Though taxes are mostly collected by the federal government, individual states are primary recipients of that same tax revenue. In a way, tax inflows and outflows act as a form of wealth redistribution among U.S. states.
To find out which states are most and least reliant on the federal government – and thus taxpayers from other states – SmartAsset evaluated tax and government spending data to determine which states are getting the best and worst return for their tax dollars.
Key Findings
- The top one percent of earners paid about 42% of the income tax revenue in the United States. This accounts for 10% of the government’s total federal tax revenue. Californian one percenters paid 16.13% of the national income tax, while New York’s top 1% paid 8.34%, Texas one percenters paid 7.85% and Floridians paid 7.58%. In some states, including Florida, Nevada and Wyoming, the top 1% of earners pay more than half of the state’s total income taxes.
- New Mexico is the only state paying less in taxes than it receives in support – paying only 85 cents in federal taxes for each dollar of support. This was the only state with that paid less in federal taxes than it received back. The next four most dependent states – West Virginia, Alaska, Mississippi and Montana – receive nearly as much in support as they send to the federal government each year. Hawaii, Vermont, Louisiana, Alabama and Wyoming also top the list of most dependent states.
- Minnesota, New Jersey, Delaware, Illinois and Florida are least dependent on the federal government. These states all contribute multiples more to the federal government than they receive, with residents paying at least $5 in taxes for every $1 in direct support received from the federal government. Minnesota – the least dependent state – pays nearly $6.88 in taxes for each dollar it receives back. Other states that made the top 10 least dependent list include Washington, South Dakota, Massachusetts, Nebraska and California.
- Texas’s love of vices disproportionately supports federal income. Texas pays an exorbitant $17B in excise taxes to the federal government – more than any other state by far and more than the income taxes on Texas’s top 1% of earners. Texas pays nearly three times as much in taxes on items like alcohol, gas, cigarettes, gambling and other specialty items as the second most state, Ohio.
States Most Dependent on the Federal Government
1. New Mexico
New Mexico pays an inexpensive $0.85 to the federal government for every dollar of support received. “Brain drain” – where highly educated workers leave for better opportunities elsewhere – has been a problem for New Mexico’s economy2. Left behind are a particularly high number of residents 65 and older.
2. West Virginia
West Virginians end up getting back almost every dollar they submit to the federal government – paying $1.04 for every dollar redistributed back to their state.
With a poverty rate of 16.8%3, West Virginia also placed third in a recent SmartAsset study determining states where residents are financially hurting the most. Additionally, just about 22% of residents have completed a college education – less than any other state in the nation.
3. Alaska
Being uniquely situated away from the United States mainland and in a particularly harsh climate, Alaska requires more support than most states. The state pays in about $1.09 for every support dollar it receives, and in 2022 had the third smallest state GDP.
4. Mississippi
Mississippi has a handful of factors working against its economic independence, leading it to receive $1 from the federal government for every $1.19 it collects from residents, businesses and transactions. The state has historically ranked high in poverty and low in education – Mississippi also ranked as the second most state where residents are hurting financially in a recent SmartAsset study. It’s also prone to natural disasters that require cleanup.
5. Montana
Known for much of its natural scenery, Montana is also home to a number of federal agencies, of which a few maintain landmarks like the Yellowstone and Glacier National Park. The Treasure State received roughly $5.1 billion from the federal government in 2021 and paid back approximately $1.53 for every federal dollar received.
States Least Dependent on the Federal Government
1. Minnesota
Between personal and corporate income taxes, excise taxes, estate taxes and gift taxes, Minnesota contributes $6.88 to the federal government for every dollar it receives for support. As the least dependent state on the federal government, Minnesota has a median household income of around $77,720 – above the U.S. median of $69,717 – and is the fifth most prominent agricultural state4.
2. New Jersey
New Jersey’s dense population, proximity to New York City and Philadelphia, beaches, and a major port and airport are an effective combination for a productive economy. New Jersey also has a particularly educated workforce, which helps support the internal economy: With 41.5% of residents completing college5, it ranks fourth in the nation for 2017-2021. For every $6.28 New Jersey forks over to the federal government, it receives $1 back.
3. Delaware
More than 65% of Fortune 500 companies in the United States are incorporated in The First State6, which is known for its business-friendliness. Delaware pays roughly $32.3 billion to the federal government in collective taxes or $6.09 for every federal dollar received.
4. Illinois
Illinois is the sixth most populous state at over 12.5 million people – it’s also got the fifth largest GDP by state7,8. And by contributing $5.88 tax dollars for every $1 in returned to it, Illinois also takes the fourth place spot for least dependent on the federal government. Chicago’s location on the Great Lakes makes it an economic hub for the midwest, and like Minnesota, it is one of the top 10 agricultural states by production in the U.S.
5. Florida
The Sunshine State is the fifth-least dependent state on the federal government contributing $5.78 tax dollars for every $1 in federal aid it receives. As a popular tourist destination, Florida had the fourth largest GDP of all states in 2022.
Data and Methodology
To compare outflowing tax dollars to support dollars incoming from the federal government, we examined personal income tax, corporate income tax, excise tax, gift tax and estate tax data, all of which were classified as gross receipts to the federal government. Gross receipts include taxes, additional fees and interest.
We compared gross receipts to federal government distributions to state and local governments for 2021 to find the ratio of tax dollars paid to federal dollars received.
Data:
- Collective tax revenue paid by states.
- Income tax, excise, estate, gift and business income tax data came from SOI Tax Stats: “Gross Collections, by Type of Tax and State” for 2021.
- Income tax data by earning percentile comes from SOI Tax Stats - Adjusted Gross Income (AGI) Percentile Data by State from the IRS for 2020. This statistic was not used for the purpose of state rankings.
- Federal share of state government revenue.This is the percentage of the state government’s revenue that comes from intergovernmental aid. Data comes from the U.S. Census Bureau’s 2020 Annual Survey of State Government Finances.
Previous editions of this study utilized a different methodology, and thus are not comparable to the 2023 study.
1FiscalData.Treasury.gov
2The University of New Mexico
3U.S. Census Bureau ACS 1 Year, 2021
4USDA Economic Research Service, 2021 data
5USDA Economic Research Service, 2017-2021 Education data
6Delaware Division of Corporations
7U.S. Census Bureau Population Clock
8Bureau of Economic Analysis, State annual gross domestic product summary for 2022
Tax Planning Tips
- Work with a finance professional. A financial advisor can help you make the most of your money. SmartAsset’s free tool matches you with up to three vetted financial advisors who serve your area, and you can interview your advisor matches at no cost to decide which one is right for you. If you’re ready to find an advisor who can help you achieve your financial goals, get started now.
- Do the math. If you’re considering itemizing your deductions instead of taking the standard deduction, it’s important to keep track of your expenses and do the math to determine whether they exceed the standard deduction.
- Know your tax liability. SmartAsset has a number of tools to help you calculate your tax liability in a given year, including an income tax calculator, capital gains calculator and a property tax calculator.
Questions about our study? Contact us at press@smartasset.com
Photo credit: ©iStock.com/franckreporter
Jaclyn DeJohn Jaclyn DeJohn is Managing Editor of Economic Analysis for SmartAsset. She oversees data studies and serves as a spokesperson. Before that, she was editor of CNET Money and Bizfluent, after spending time as a research consultant and in real estate. Jaclyn holds a bachelor of arts in economics from The College of New Jersey.
FAQs
In 2023, about $363 billion will be spent on income security programs like unemployment compensation, earned income tax credits, child nutrition programs and the Supplemental Nutrition Assistance Program (SNAP).
What states rely on federal funding the most? ›
States Most Dependent on the Federal Government
- New Mexico. New Mexico pays an inexpensive $0.85 to the federal government for every dollar of support received. ...
- West Virginia. ...
- Alaska. ...
- Mississippi. ...
- Montana. ...
- Minnesota. ...
- New Jersey. ...
- Delaware.
Where Did Your Tax Dollars Go? A Federal Budget Breakdown
- Major entitlements—Medicare, Medicaid, other health care, and Social Security—devoured nearly half of the 2022 budget, consuming 46 percent of all spending. ...
- Other federal transfer programs consumed another 18 percent.
Here are the top 5 least federally dependent states:
- New Jersey.
- Washington.
- Utah.
- Kansas.
- Illinois.
Standard deduction increase: The standard deduction for 2023 (which'll be useful when you file in 2024) increases to $13,850 for single filers and $27,700 for married couples filing jointly. Tax brackets increase: The income tax brackets will also increase in 2023.
What percent of our taxes go to welfare? ›
Roughly 14 percent of the budget provides assistance to families and individuals in need.
What states are most dependent on welfare? ›
Most Federally Dependent States
| Rank | State | Total Score |
|---|
| 1 | Alaska | 83.18 |
| 2 | West Virginia | 76.02 |
| 3 | Mississippi | 71.31 |
| 4 | Kentucky | 70.95 |
46 more rowsMar 15, 2023
The states with the highest SNAP participation rates as of November 2022 are:
- New Mexico (24.3%)
- Louisiana (19.5%)
- West Virginia (18.2%)
- Oklahoma (17.2%)
- Oregon (17.0%)
- Illinois (16.2%)
- Alabama (15.4%)
- Massachusetts (15.2%)
Spending Categories
- 19 % Social Security.
- 15 % Health.
- 14 % Income Security.
- 12 % National Defense.
- 12 % Medicare.
- 11 % Education, Training, Employment, and Social Services.
- 8 % Net Interest.
- 4 % Veterans Benefits and Services.
We use your taxes to pay people who are getting benefits right now. Any unused money goes to the Social Security trust funds, not a personal account with your name on it. Many people think of Social Security as just a retirement program.
Here's who pays the most
As a group, the top quintile — those earning $130,001 or more annually — paid $3.23 trillion in taxes, compared with $142 billion for the bottom quintile, or those earning less than $25,000.
What taxes take the biggest chunk of your paycheck away? ›
That's where our paycheck calculator comes in. Tax withholding is the money that comes out of your paycheck in order to pay taxes, with the biggest one being income taxes.
Which US state has the weakest economy? ›
The three U.S. states with the highest GDPs were California ($3.6 Trillion), Texas ($2.356 Trillion), and New York ($2.053 Trillion). The three U.S. states with the lowest GDPs were Vermont ($40.6 Billion), Wyoming ($47.4 Billion), and Alaska ($63.6 Billion).
Who is stronger federal or state? ›
The Constitution made a stronger Federal Government. It gave power to both the Federal Government and the state governments. This system is called federalism. Here are some examples of how powers are shared between the Federal Government and state governments.
Which states are richer red or blue? ›
If we measure by consumption patterns then it's the blue states that are poor, the red states that are rich: Blue states, like California, New York and Illinois, whose economies turn on finance, trade and knowledge, are generally richer than red states.
What is the standard deduction for seniors in 2023? ›
The standard deduction for those over age 65 in 2023 (filing tax year 2022) is $14,700 for singles, $27,300 for married filing jointly if only one partner is over 65 (or $28,700 if both are), and $21,150 for head of household.
How to get the biggest tax refund in 2023? ›
Follow these six tips to potentially get a bigger tax refund this year:
- Try itemizing your deductions.
- Double check your filing status.
- Make a retirement contribution.
- Claim tax credits.
- Contribute to your health savings account.
- Work with a tax professional.
For 2023, assuming no changes, Ellen's standard deduction would be $15,700: the usual 2023 standard deduction of $13,850 available to single filers, plus one additional standard deduction of $1,850 for those over 65.
Is the US welfare state the most generous in the world? ›
Over the past century, Europeans have built large welfare states, while the US has maintained a much less generous system. While America spends about 11 percent of its national income on social programs, France spends almost double that amount ; Nordic countries spend even more.
What population gets the most welfare? ›
According to the Social Security Administration, the largest percentage of the American population on welfare are retirees and their dependents (75.2%).
Today, Social Security is the largest program in the federal budget and typically makes up almost one-fifth of total federal spending. The program provides benefits to nearly 66 million beneficiaries, or about 20 percent of the American population.
What state pays the best welfare? ›
1. New York. Coming in first spot is New York with the Empire State spending roughly 4,094 dollars on local welfare spending per capita.
What percentage of the white population in the United States is on welfare? ›
WELFARE PARTICIPATION RATES BY RACE AND ETHNIC GROUP
| Percent of the Eight-Year Period on Welfare |
|---|
| Percent Ever on Welfare | Persons Ever On |
|---|
| Non-Hispanic White | 11.9 | 41.0 |
| Non-Hispanic Black | 49.7 | 56.7 |
| Hispanic | 36.2 | 49.2 |
2 more rowsSNAP recipients represent different races and/or ethnicities. White: about 37 percent; African American: 26 percent; Hispanic: 16 percent; Asian: 3 percent; and Native American: about 2 percent.
Who uses food stamps the most? ›
Whom Does SNAP Reach?
- more than 71% of SNAP participants are in families with children.
- more than 38% are in families with members who are older adults or are disabled.
- more than 37% are in working families.
The Top Ten States for Low-Income Individuals & Families
- Vermont. ...
- Rhode Island. ...
- New York. ...
- Michigan. ...
- Illinois. ...
- Massachusetts. ...
- Minnesota. ...
- Nevada.
CBO: U.S. Federal spending and revenue components for fiscal year 2022. Major expenditure categories are healthcare, Social Security, and defense; income and payroll taxes are the primary revenue sources.
What are the top 5 expenses of the federal government? ›
- Military (Discretionary)
- Social Security, Unemployment, and Labor (Mandatory)
- Medicare and Health (Mandatory)
- Government (Discretionary)
- Education (Discretionary) Whether you owe money to the IRS or you have a State tax debt, our staff of Enrolled Agents and Tax Professionals can help you!
Medicare Program is the United State's Single Largest Health Program.
What age do you stop paying taxes on Social Security? ›
Key Takeaways. Social Security benefits may or may not be taxed after 62, depending in large part on other income earned. Those only receiving Social Security benefits do not have to pay federal income taxes.
President Jimmy Carter
| 1. | SOCIAL SECURITY SYSTEM--May 9, 1977 |
|---|
| 2. | REMARKS ON SIGNING H.R. 3 INTO LAW-- October 25, 1977 |
| 3. | SOCIAL SECURITY FINANCING BILL -- October 27, 1977 |
| 4. | SOCIAL SECURITY FINANCING LEGISLATION -- December 1, 1977 |
| 5. | SOCIAL SECURITY AMENDMENTS OF 1977 --December 20, 1977 |
8 more rowsTo acquire the full amount, you need to maximize your working life and begin collecting your check until age 70. Another way to maximize your check is by asking for a raise every two or three years. Moving companies throughout your career is another way to prove your worth, and generate more money.
What percentage of Americans do not pay taxes? ›
In total, about 59.9 percent of U.S. households paid income tax in 2022. The remaining 40.1 percent of households paid no individual income tax.
Does the middle class pay the most taxes? ›
Middle-Class Income Doesn't Matter as Much as Tax Brackets
The lowest tax bracket is 10%. The highest tax bracket is 37%. If you're in the middle class, you're probably in the 22%, 24% or possibly 32% tax brackets.
Who bears most of the tax? ›
When supply is more elastic than demand, buyers bear most of the tax burden. When demand is more elastic than supply, producers bear most of the cost of the tax. Tax revenue is larger the more inelastic the demand and supply are.
Is it better to claim 1 or 0? ›
By placing a “0” on line 5, you are indicating that you want the most amount of tax taken out of your pay each pay period. If you wish to claim 1 for yourself instead, then less tax is taken out of your pay each pay period.
What is taken out of my Social Security check? ›
NOTE: The 7.65% tax rate is the combined rate for Social Security and Medicare. The Social Security portion (OASDI) is 6.20% on earnings up to the applicable taxable maximum amount (see below).
What are the 3 main taxes taken out of a paycheck? ›
They consist of federal income tax, Federal Insurance Contributions Act (FICA) tax (Medicare and Social Security) and state income tax.
Which state is richest in USA? ›
New York is the richest state in the US, with a GDP per capita at $96,5k. This means that New York is responsible for around 9% of America's entire economic output, the highest percentage amongst the 50 states.
What is the poorest state in USA? ›
Mississippi. Mississippi tops the list as the poorest state in the US, with an alarming poverty rate of 18.70%. Despite its rich history and cultural heritage, the state faces numerous economic challenges, including limited job opportunities, low wages, and a high percentage of residents living below the poverty line.
Mississippi (48.2%), Alabama (45.9%), Louisiana (45.6%), West Virginia (43.7%), Kentucky (42.9%), Texas (42.0%) and Arkansas (42.0%) all rank among the top 10 in the country in terms of people who reported finding it “somewhat” or “very difficult” to cover their expenses.
Who feared a strong federal government? ›
The Anti-Federalists opposed the ratification of the 1787 U.S. Constitution because they feared that the new national government would be too powerful and thus threaten individual liberties, given the absence of a bill of rights.
What states depend on the federal government most? ›
Hawaii, Vermont, Louisiana, Alabama and Wyoming also top the list of most dependent states. Minnesota, New Jersey, Delaware, Illinois and Florida are least dependent on the federal government.
Which part of U.S. government is most powerful? ›
The executive branch's key roles include: President - The president is the head of state, leader of the federal government, and Commander in Chief of the United States armed forces.
What is the biggest Republican state in America? ›
Based on the latest CPVI data, Wyoming is the most Republican state in the nation. Following behind is West Virginia, then North Dakota takes third place.
What are the 10 poorest states? ›
Poorest US States
| Rank | State | Median Household Income 2021 (US dollars)* |
|---|
| 1 | Mississippi | $48,716 |
| 2 | West Virginia | $51,248 |
| 3 | Louisiana | $52,087 |
| 4 | Arkansas | $52,528 |
16 more rowsApr 25, 2023
According to the latest Census data, 9 of the 10 states with the lowest per-person income levels were Red: Mississippi, Arkansas, Idaho, West Virginia, Kentucky, Utah, Alabama, South Carolina and Oklahoma.
Will tax refunds be bigger in 2023? ›
According to early IRS data, the average tax refund will be about 11% smaller in 2023 versus 2022, largely due to the end of pandemic-related tax credits and deductions.
Will there be tax refunds in 2023? ›
The average refund amount in 2023 is trending lower than this time last year. The page has turned on another tax filing season and here's the data on what refunds looked like this year. As of Apr. 21, the IRS reported the average refund amount (aka money taxpayers overpaid the government) in 2023 as $2,753.
Will tax refunds be more in 2023? ›
Refunds may be smaller in 2023.
Several factors contribute to this. For example, taxpayers will not receive an additional stimulus payment with their tax refund because there were no Economic Impact Payments for 2022.
Those rates—ranging from 10% to 37%—will remain the same in 2023. What's changing is the amount of income that gets taxed at each rate. For example, in 2023, an unmarried filer with taxable income of $95,000 will have a top rate of 22%, down from 24% in 2022.
Why is my tax return so low 2023 with dependents? ›
The Internal Revenue Service (IRS) says the reason many people will be receiving a smaller tax return is due to shrunken tax credits and deductions. The changes come after the stimulus was given.
What taxes are going up in 2023? ›
In 2023, that threshold is rising by about 7% to $44,625. Single taxpayers who earn above that amount are subject to a 15% capital gains tax, while those who earn above $492,300 in 2023 will be subject to the top capital gains rate of 20%.
What is the standard deduction for 2023 over 65? ›
The IRS considers an individual to be 65 on the day before their 65th birthday. The standard deduction for those over age 65 in 2023 (filing tax year 2022) is $14,700 for singles, $27,300 for married filing jointly if only one partner is over 65 (or $28,700 if both are), and $21,150 for head of household.
How do I get a $10000 tax refund 2023? ›
How to Get the Biggest Tax Refund in 2023
- Select the right filing status.
- Don't overlook dependent care expenses.
- Itemize deductions when possible.
- Contribute to a traditional IRA.
- Max out contributions to a health savings account.
- Claim a credit for energy-efficient home improvements.
- Consult with a new accountant.
The inflation-adjusted increases to certain tax credits, deductions, and tax brackets for next year could translate into larger tax refunds when folks file their taxes in 2024. The tax bracket ranges are increasing by 6.9% on average for the 2023 tax year, according to the National Association of Tax Professionals.
When can I expect my tax refund with child tax credit 2023? ›
The IRS expects most EITC/ACTC related refunds to be available in taxpayer bank accounts or on debit cards by February 28, if they chose direct deposit and there are no other issues with their tax return. However, some taxpayers may see their refunds a few days earlier.
What will the standard deduction be for 2023? ›
Standard Deduction Amounts for 2023 Taxes (Returns Due April 2024)
| Filing Status | Standard Deduction 2023 |
|---|
| Single; Married Filing Separately | $13,850 |
| Married Filing Jointly & Surviving Spouses | $27,700 |
| Head of Household | $20,800 |
Apr 20, 2023
What is the average tax refund for a single person making $30,000? Based on our estimates using the 2017 tax brackets, a single person making $30,000 per year will get a refund of $1,556. This is based on the standard deduction of $6,350 and a standard $30,000 salary.
Does Social Security count as federal tax? ›
Some of you have to pay federal income taxes on your Social Security benefits. This usually happens only if you have other substantial income in addition to your benefits (such as wages, self-employment, interest, dividends and other taxable income that must be reported on your tax return).
NOTE: The 7.65% tax rate is the combined rate for Social Security and Medicare. The Social Security portion (OASDI) is 6.20% on earnings up to the applicable taxable maximum amount (see below). The Medicare portion (HI) is 1.45% on all earnings.
