No, Red State Economies Don’t Depend on a “Gravy Train” from Blue States

When Congresswoman Marjorie Taylor Greene called (again) for “national divorce” this week, a common retort among her detractors on Twitter was to claim that so-called red states are heavily dependent on so-called blue states to pay for pretty much everything. Reporter Molly Knight claimed, for example, that “Red states get their money for roads and cops and schools from blue states. You cut off that gravy train and you e [sic] got a third world country.”

Others claimed that red states would be “entirely broke” without blue states. America’s social democrats have apparently fully gone over to pushing the narrative that the “red states” are poor band backward while the “blue states” are productive and economically sophisticated.

The implication here is that red states would never survive any sort of separation from the blue states because the red states would then miss out on the presumably large amounts of free money transferred from blue states to red. 

Unfortunately for these critics, the data doesn’t really back them up. While it is certainly true that a handful of red states receive much more in federal spending than their residents pay in federal taxes, this is not at all the situation across most red states. This is especially not the case in states with states with larger metropolitan areas such as Florida and Texas. 

The real story is more complicated, and to see the details, we can look at state-by-state comparisons in terms of “return on taxes paid.” This is a measure of how much each state receives in federal spending for every dollar extracted in federal taxes. States with a “return” above one dollar are getting back more than their residents paid in federal taxes. Residents in a state with a “return” below a dollar pay more than they receive. 

To do this analysis, we start with the tax collections from each state, as reported by the Internal Revenue service. Then, we look at federal spending in each state. There are some smaller categories of spending that are difficult to track, but we can capture the overwhelming majority of federal spending in each state by looking at several key categories:

• State revenues from federal intergovernmental transfers (2019).
• Department of Defense spending by state (2019).
• Federal share of Medicaid by state (2021).
• Medicare spending by state (2019).
• Social security spending (OASDI) by state1 (2021).

Once we add it all up we can see the “return on taxes paid” in graph form below:

By this analysis, the federal spending in Minnesota only amounted to 48 cents for every tax dollar extracted from the state. On the other hand, Mississippi received more than three dollars for every tax dollar paid by residents. Contrary to the idea that most red states are more or less like Mississippi, however, we find that most states—both red and blue—are much closer to the middle on this. The states that are within a few cents of receiving a dollar for a dollar—i.e., “breaking even”—include the Dakotas, North Carolina, Nevada, Wisconsin, Missouri, Utah, Maryland, Kansas, and Florida. Meanwhile, California and Texas are more of less equal with each other, receiving about 80 cents in federal spending for every dollar paid by residents in taxes. 

My findings here are similar to the study that was repeatedly sent to Rep. Greene by many of her scoffing critics. Specifically, Green was instructed to read this Moneygeek article which purportedly “proves” that the red states depend heavily on blue-state largesse to survive.  Yet, with both our analysis here, and with the Moneygeek article, we will find that the characterization of red states as an economic drain on the country requires