Courting division: battling it out over the distribution of federal tax revenue

Bitch. Bitch. Bitch.

To the long list of issues dividing a factious America, add one more.

Since Donald Trump’s election, the chorus of people bitching about some states contributing more in taxes to the federal government than they receive back in Federal spending has gotten louder.

balanceofpayments

Source: Giving or Getting? New York’s Balance of Payments with the Federal Government, Rockefeller Institute of Government, January 22, 2020

A January 2020 report from the Rockefeller Institute of Government calculated that forty-two states, including Oregon, had a positive balance of payments with the Federal government for 2018, each receiving more Federal spending than taxpayers remitted in Federal taxes and other Federal revenues. But eight states, including New York, had a negative balance of payments in 2018.

New York consistently holds itself up as the biggest loser in terms of what states give and get. According to the Rockefeller Institute report, New York sent $22 billion more in taxes to the federal government in 2018 than it received back and $116.2 billion more over the past four years.

Andrew Cuomo

New York Governor Andrew Cuomo argues New York is the “number one giver” of federal tax revenue and has been “bailing out red states for decades.”

“We believe this report is essential reading for policymakers and advisors in Congress and the executive when determining “winners” and “losers” in upcoming federal policy debates.,” wrote Patricia Strach, Interim Executive Director of the Rockefeller Institute.

But focusing on “winners” and “losers” in the allocation of taxes is a mistake that sets the stage for even greater polarization that will undermine the country’s strength.

You only need to look at the chaos that ensued under the Articles of Confederation went into effect in March 1781 to see the folly of putting state’s rights over the common good. As George Washington put it, the states needed to abandon “local prejudices and policies” for “the interest of the community.”

What was needed Washington and many other leaders many leaders concluded was a more complex, centralized government under a new constitution formulated at a convention of state delegates.

On Nov. 23, 1786 Virginia’s General Assembly adopted an act making it clear the states had “…to decide the solemn question – whether they will, by wise and magnanimous efforts, reap the just fruits of that independence which they have so gloriously acquired and of that union which they have cemented with so much of their common blood – or, whether by giving way to unmanly jealousies and prejudices, or to partial and transitory interests, they will renounce the auspicious blessings prepared for them by the revolution…”

The Constitution that emerged from the Constitutional Convention in Sept. 1787 was a momentous achievement that set the foundation for a vibrant, unified nation. Complaints about the distribution of federal tax revenue among the states can only undermine national cohesion.

Far better to understand that in a system with progressive taxes, where wealthier people pay more and extra money is redistributed to people in need, states with wealthy residents will give more than they get.

Moreover, as the Tax Foundation wrote in a Special Report, strictly considering whether a state gets as much as it pays in isn’t “a very civic minded view of federal government. Presumably citizens pay federal taxes to provide for the common defense and to support other national programs that benefit the nation as a whole.”

Focusing on the uneven balance of payments just spurs more national divisiveness (as if we don’t have enough already) and draws attention away from America’s need for a commitment to justice and equality.

As the COVID-19 signs say, “We’re all in this together.”

 

 

 

 

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