Barack Obama, on the night of his election, stretched the truth a bit when he said that the American people had affirmed a belief in something grander than a “collection of red states and blue states.” But even stranger was the apparent dig at the hoary conception of America as a collection of states. Heck, I’d settle for being a collection of states–it’s preferable to say the U.S. are than is–but regardless of the Founders intentions, in 2012 that’s not what we really are.
So one has to love those atavists who still flaunt their state identity. They’re hard to come by these days. Like this Marylander who feels entitled to his state and local tax breaks because his state pays more to the federal government than it takes in, thereby, supposedly, subsidizing all those Southerners draining our tax dollars:
… even after the state tax deduction, the citizens of each of these states (with the exception of Maryland) pay far more into federal coffers than their states receive back, effectively subsidizing virtually every “red” state. In effect, the tax code acts as a mechanism to shift revenue from liberal to “fiercely independent” conservative states
This is an elision of something Sam Goldman pointed out a while back, that red states, especially in the South, pay significantly less in federal income tax. Matt Yglesias claims that is “the general structure of the American fiscal union—high productivity states tend to vote for Democrats and subsidize the low productivity states where most people vote Republican.” But that doesn’t exactly follow.
When you look at federal spending per state, blue states dominate the top of the list. Texas is the exception when you’re looking at total spending, and Alaska is the exception when you’re looking at spending per-capita. There are other outliers–Virginia, for example, benefits greatly from bloated military budgets–but federal spending is generally concentrated in blue states, not red ones. TARP went to mostly New York City-based banks, the auto bailout benefited Michigan, welfare spending is concentrated in urban areas, and, while Texas received the largest amount of infrastructure spending in the stimulus, four out of five of the runners-up are solidly blue states (the other is Florida), and much of the stimulus went to staving off blue-state budget deficits. They’re paying more in, and getting more out. That’s why eliminating the state and local tax deduction would be such a blow to Democrats; blue-state taxpayers will end up paying for both levels of the “blue model” government they tend to favor.
This all assumes that voters are acting in their economic self-interest. Joel Kotkin isn’t so sure. If the president gets his way in the fiscal cliff negotiations, income tax rates would go up on high earners, mostly concentrated in blue states. Blue-staters also disproportionately take advantage of the tax deductions currently on the chopping block, like the one for mortgage interest, disproportionately benefit states with high property values. Jim Geraghty proposes a plan to just tax those rich people, which Yglesias calls a “fine idea.”