These are the most and least federally-dependent U.S. states
Republican-leaning states tend to be more reliant on federal funding, according to a recent study from WalletHub.
The analysis looked at the return on taxes paid to the federal government, the share of federal jobs, and federal funding as a share of state revenue, and weighed the federal aid dependence of each state's government and their residents separately.
"Overall, blue states are less dependent on the federal government than red states," WalletHub Analyst Jill Gonzales told Yahoo Finance. "States with high taxes and GDP have a lower dependency on the federal government, while states with low taxes and GDP depend more on federal aid."
Alaska was ranked first overall as being the most federally-dependent state while Delaware was the least dependent and also first in the lowest amount of other financial assistance received.
A majority of the five states with the lowest GDP — South Carolina, Alabama, West Virginia, Arkansas, and Mississippi — are also among the most federally dependent states on the list. (Interestingly, however, Alaska is among the top five states for highest GDP despite being the most federally dependent state in the nation.)
States that ranked higher for financial independence — such as New Jersey, Minnesota, and Massachusetts — received exponentially fewer federal contracts and grants between 2021 and 2022 than states on the other end of the spectrum, like Mississippi, New Mexico, and West Virginia.
Dr. Benjamin Clark, an associate professor at the University of Oregon, told Yahoo Finance that certain state programs can create "an appearance of dependence" even though they are sometimes driven by federal investments "that have nothing to do with entitlement programs." For example, he said, some states have a "disproportionately" large number of military bases, which creates more federal job opportunities.
Clark added that focusing on income tax "ignores the fact" that it's not the only tax collected by the federal government.
"Excise taxes, corporate income taxes, tariffs, Social Security, and Medicare and Medicaid all have separate ways in which they bring in money to the federal government coffers," he said. "Some of these taxes may be a much larger burden on residents of these 'dependent' states than those in wealthier ones."
Luke is a producer for Yahoo Finance. You can follow him on Twitter @theLukeCM.
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