Giving and receiving

An annual study of federal taxes vs. federal payments to the states shows Maine along with Vermont as the only northeastern states to have surpluses from the exchange. The difference in Maine, according to Harvard’s John F. Kennedy School of Government, is worth $1,324 per person in areas such as veterans’ benefits, other defense spending, Medicare and Social Security. It may be better to give than receive, but Maine would be hard-pressed to do without this subsidy.

Maine ranks 16th among states for 1999 in what is called the balance of payments. Its residents sent in taxes to the federal government that equaled $4,215 per person and got back in benefits $5,539 on average. That return is right at the national average, by the way; Maine has a net gain because the amount it sends in is so low, ranking 45th in the country.

In this year’s accounting, the Kennedy School asked the person who provoked the study in 1976 to provide commentary, and he is not happy. Daniel Patrick Moynihan, the recently retired senator of New York, first looked into these numbers because he was convinced that his state, seen at the time as the reigning welfare queen of the nation, was, in fact, a national philanthropist.

It turned out he was right: New York is regularly among the top 10 states that give substantially more than they get back. (Top giver in 1999 and previous years was Connecticut; top receiver, New Mexico. Coincidentally, a curious pattern among the top giving and receiving states emerged in the 2000 election: eight of the 10 highest givers went for Al Gore, who might have been expected to continue to rely on their taxes; eight of the 10 most dependent on the federal government went for George Bush.)

Sen. Moynihan, however, wants all of this to change. Taking from well-off states and giving to the poorer ones year after year is fine during a crisis like the Depression, he writes, but now is the time for “less activism in Washington in return for more revenues at home, for whatever active measures recommend themselves to the state or municipality in question.” Being Sen. Moynihan, he cites Pope Leo XIII and Pius XI’s ideas on subsidiarity, that nothing should be done by a higher level of government if it can be done at least as well by a lower one. He points out that the graduated federal income tax, meant to bring about more equality among citizens, also “brought about a huge disparity in the uncommitted resources of the Federal against State and local governments.” He quotes several people, here and abroad, who view the current distribution system unfavorably.

If Maine were to get back from the federal government simply what it sent in, without accounting for things the federal government must do, like national defense, or can do better than localized governments, like pollution control, it would lose approximately $1.7 billion a year. The loss would make closing the state’s $200 million budget shortfall a pleasure in comparison. Fortunately for Maine, 31 states are net receivers, so the political possibility of the remaining generous 19 doing anything about the situation is remote, even if it were desirable.

But Maine’s dependence on others is remarkable nonetheless and leaves the state, as with so many economic issues, at the mercy of somewhere else. But however undesirable this position is, manners still count: The next time you see tourists from one of the big giver states be sure to thank them.