Marjorie Taylor Greene thinks it is time for red states and blue states to go their separate ways. “Everyone I talk to says this,” she tweeted, “From the sick and disgusting woke culture issues shoved down our throats to the Democrat’s traitorous America Last policies, we are done.”
She may have a point…
For at least a decade now, I have argued that blue state America has been dealt a bad hand, politically and financially. I circulated a book proposal six years ago with the title “FedExit! To Save Our Democracy, It’s Time to Let Alabama Be Alabama and Set California Free,” but to no avail. It seems, however, that like a Chinese balloon, once you float something, you never know where it could end up. In this case in the hands of Marjorie Taylor Greene.
Politically, the Constitution from day one gave disproportionate political power to small and rural states – which today are by and large red states if you ignore Delaware and Rhode Island – by giving each state two senators regardless of size, and then compounded that political advantage in the structure of the Electoral College.
The bad financial deal for blue states came more recently, with the ratification just over a century ago of the 16th Amendment that created the federal income tax, which shifted the burden of paying the cost of the federal government onto the wealthier states and taxpayers at the time in the Northeast and Midwest.
A comparison of the federal income taxes paid and benefits received between Delaware and West Virginia provides a case in point of how that impact is felt today. Based on data compiled for the year 2014 by the National Priorities Project, West Virginia received over $7,000 in federal aid per capita – largely from entitlement programs such as Social Security and Medicare – while paying less than $3,000 per capita in federal income taxes, for a net subsidy from the federal government of $4,000 per person. At the other end of the spectrum, Delaware paid the federal government $19,800 per capita in federal income taxes while receiving $6,400 per capita in federal aid, for a net outflow to the federal government – and then on to red states like West Virginia – of $13,400 per capita.
The reason for that difference is simple: the Delaware economy is more productive than West Virginia’s, with per capita personal income of $36,000, or roughly 50% more than West Virginia’s $24,400. Delawareans earn more, pay more in federal income taxes, and rely less on federal government social programs.
The notion that the federal government operates a massive system of income redistribution from blue states to red states is not just spin offered up by some progressive think tank. Rather, it is a view laid out cogently by the center-right Tax Foundation. In its study entitled “Federal Tax Burdens and Expenditures by State,” the Tax Foundation went even further, emphasizing that the federal income tax not only redistributes income from the wealthy to the poor – as progressive supporters of the 16th Amendment hoped would be the case a century ago, and no doubt many Democrats would support today – but that it redistributes income from the middle-income residents of high-cost states to the middle-income residents of low-cost states, a form of redistribution that has little political, much less moral justification.
The net outflow of dollars being sucked out of blue states is huge. In 2021, for example, New York State taxpayers paid $285.1 billion in federal personal income taxes, an amount that was $73 billion – or $3,700 per capita – higher than it would have been had the federal tax burden been shared among the states on an equal per capita basis as the Constitution originally required. That means that New York taxpayers contributed an additional $73 billion – an amount greater than New York State’s personal income tax and sales tax collections for that year combined – into the federal kitty to pay for federal programs provided to residents of those states that Marjorie Taylor Greene suggested would like out.
Of course, far from appreciating this built-in system of blue state largesse, the fact that red state residents are financially dependent on blue state charity has only compounded the resentments that divide us. Indeed, even as they ridicule New York, the Left Coast, and Taxachusetts, red state politicians are never able to explain why, after decades of their low state tax policies – to say nothing of literally trillions of dollars of subsidies that have flowed to their states from blue state coffers – their states remain near the bottom in state rankings of key economic and demographic outcomes, while the high-tax blue states they deride continue to produce higher family incomes across their populations.
While economists like Art Laffer and Stephen Moore regularly proclaim tax cuts to be the panacea that will assure economic prosperity, the simple fact is that educational attainment has long been the primary driver of state and family financial success, and investments in education – including K-12 schooling, community colleges, and research universities – rather than tax cuts have been the key to improving family incomes over time.
As I studied the financial inequities created by the ratification of the 16th Amendment, I never concluded that a “national divorce” was the solution but instead suggested eliminating the federal income tax and restoring a greater degree of federalism and state self-reliance. Year after year, blue state advocates of single-payer healthcare or investments in mass transit wonder why their states lack the money to achieve their hopes and dreams, and the answer is simple: their money has been shipped off to Alabama.
Suffice it to say, if Greene explained that each man, woman and child in New York would get to keep that $3,700 each year as part of the deal, she could probably count on their support for the constitutional amendment that would be required to let the red states leave.
But the blue state argument for ending the century-long experiment in federal redistribution is not simply that California, New York and others should not be forced to continue to subsidize less economically productive states – particularly ones that appear to loath their “sick and disgusting woke culture” – but also that decades of federal subsidies have brought with them the sort of moral hazard of which conservative commentators have long warned: Flush with the flow of federal money decade after decade, red states appear to have had fewer incentives to use their own resources to make the kinds of investments that would have increased family incomes in their states over time, and ultimately reduced reliance on blue state money.
Marjorie Taylor Greene may want a national divorce, and if they understood how much money the current system is costing them, many blue state taxpayers might enthusiastically support the idea. But a divorce along state lines will not solve the deep divide in our politics. Greene may choose to view red and blue America as divided along state lines, but the truth is far more complicated. Not only do those divisions exist within each state – as every state includes predominantly blue urban areas and predominantly red rural areas – but they are present within the communities in which we live, and for many of us around the holiday table when we gather together with our families.
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