03/31/2014
Caitlin Wilson
As discussion surrounds Gov. Pat Quinn’s new budget proposal and tax plans for Illinois, a new study by WalletHub found that states with higher taxes tend to have a lower level of dependency on federal government funds. Illinois ranked as the number two least dependent state on federal government funding, compared with the other 49 states and the District of Columbia. The state has the fifth highest state and local taxes in the country, according to the study.
The authors of the study asked:
What if, for example, a particular state can afford not to tax its residents at high rates because it’s receiving disproportionately more funding from the federal government than states with apparently oppressive tax codes?
The rankings were based on returns on taxes paid to the federal government (in which Illinois ranked third with $0.56), federal funding as a percentage of state revenue (in which Illinois ranked eighth with 26.23 percent) and the number of federal employees per capita (in which Illinois ranked 11th with 6.45 federal employees per capita).
This map from the study, below, shows each state’s overall dependency ranking.
The study also found that Illinois received the fourth lowest direct payments with about $0.30 per dollar in federal taxes paid.
While this study may help explain why some states, such as Illinois, have higher tax rates, it does not account for every variable in the equation. Some states have more federal facilities (and therefore, more federal employees, one of the study’s main criterion for calculating dependency) and receive more federal funding this way, such as research facilities in Idaho, which ranked as the 31st least federal-fund dependent state, and military bases in states such as Mississippi, New Mexico and Louisiana, which all ranked high in government dependence. On the other hand, states such as Texas and Florida also have several military bases and are ranked at mid-level dependency (32 least and 38 least, respectively) on federal funds.
Other states, such as Rhode Island, Missouri and Arkansas had mid-level dependency on federal funds and mid-level state tax rates, though other states, such as New York, showed lesser correlation between state tax rates and federal fund dependency.
Where does Illinois rank in sales tax?
Read the full text of Gov. Pat Quinn’s 2014 budget address
What’s going on with taxes in Illinois?
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Check out this cartoon: “Temporary” is a relative term to Gov. Pat Quinn