California residents and businesses contribute $83 billion more than the state receives in federal spending. Why is there a gap?
On the spending side:
- States with higher poverty rates, a large population of older adults, major federal facilities (such as military bases), a large volume of federal contracts, and/or a substantial federal employee presence are likely to receive a disproportionate share of federal funds. These factors contribute to relatively higher federal spending in many other states (on a per capita basis) compared to California.
On the revenue side:
- States, like California, with more wealthy residents and high per capita incomes account for a disproportionate share of federal revenue due to the progressive federal tax system. In fact, California ranks in the top 10 among all states in terms of federal taxes paid on a per capita basis.
These points help to illustrate why the $83 billion gap exists in California. However, with devastating funding cuts on the policy agenda in Washington, DC, it’s worth taking a closer look at where California’s tax contributions could be going.
If Congress adopts the enormous funding reductions proposed, the gap between what Californians pay in federal taxes and what California receives in federal spending would likely grow larger.
This is because Californians would continue to disproportionately contribute to federal revenues — even with an extension of expiring tax cuts — whereas our state would get back even less of those dollars after deep cuts to health care, food assistance, and other vital services took effect (to help pay for the cost of the tax cuts).
As a result, state policymakers would be forced to cut support for Medi-Cal and other essential state programs, since a deep federal funding hole would be nearly impossible to backfill with state dollars.
California contributes much to the nation thanks to the creativity, vitality, and hard work of the nearly 40 million people of diverse backgrounds who call the Golden State their home.
Federal tax dollars — including those paid by Californians — should be used to strengthen vital public services and help all people make ends meet, rather than helping corporations and the wealthy avoid paying their fair share of federal taxes.
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