by Howard Stephenson
When federal taxes paid by Utahns are compared to federal receipts of all kinds, Utah is one of thirty-four states that are subsidized by the remaining sixteen states. In other words, for every dollar that Utah taxpayers sent to the federal government during FY 2002, we received a dollar and fifteen cents back, according to a recent study by the Northeast-Midwest Institute (NEMW).
Utah’s return on the federal tax dollar is ranked 24th highest among the fifty states. NEMW arrived at Utah’s middle of the pack ranking by comparing five federal spending categories: Retirement and Disability, Other Direct Payments, Grants, Procurement, and Salaries and Wages of federal employees in each state.
The NEMW report attributed a large portion of federal spending in all states to disability and retirement. The report’s 2002 figures show that for social security’s disability and retirement payments Utah received $1,607 per-capita, the second lowest dollar amount in the nation. This is largely attributable to Utah’s young population. The Governor’s 2003 Economic Report indicates that in the year 2000, Utah’s median age of 26.7 years was the youngest in the United States.
For “other direct payments”, which includes federal spending for items like Medicare, rent supplements and food stamps, Utah received $807 per capita, the lowest in the Nation, and for “grants,” which included items like Medicaid, highways and transit, and low-income housing, Utah received $1,164 per capita, which was the 8th lowest in the Nation. The Governor’s 2003 Economic report also shows that in 2000 Utah had the 10th lowest poverty rate in the Nation and had a median household income of $48,378, which was the 12th highest in the Nation. Utah’s relatively strong economic well-being also reduced Utah’s reliance on other federal programs.
The location of federal facilities in Utah caused higher than average amounts of federal spending dollars to funnel back to Utah. The NEMW report showed that in 2002 “procurement” and “federal salaries and wages” received comparatively higher amounts of federal spending in Utah. Utah was the 12th highest in per-capita spending, $900, for “federal salaries and wages” and 21st highest in per-capita “procurement” spending at $833. These high amounts are largely attributable to Hill Air Force Base, and the Internal Revenue Service Center in Ogden. The defense industry has a particularly large presence in Utah. According to the Governor’s 2003 Economic Report, the defense industry in Utah continued to expand in 2001, with spending totaling $2.35 billion.
Although Utah’s rankings were comparatively high in “procurement” and “federal salaries and wages,” Utah’s total per capita federal spending in 2002 was far below average. This is attributable to the other three federal spending categories — retirement and disability, other direct payments, and grants. For example, “disability and retirement” exhausted the largest portion of federal spending and of this portion Utah received the second lowest amount. Utah also received proportionately lower amounts in “other direct payments” and “grants”.
The NEMW provides statistical data that indicates that Utah’s middle of the pack ranking is a combination of a comparatively small per capita federal tax burden ($4,527— 44th lowest) and the redistribution of a comparatively small amount of per capita federal dollars ($5,311—48th lowest). In other words, Utah’s comparatively low per-capita federal tax burden required only a slightly larger amount of federal spending to produce a net positive return. This combination of the two low rankings provided the Utah taxpayer with a fifteen-cent return on the dollar and a 24th ranking. In comparison, the fifteen cents net return Utah received was significantly less than New Mexico, which had the highest return on the dollar— a net gain of $1.34 and it was significantly higher than the lowest ranking state, New Jersey, which lost forty-four cents.
Utah has a comparatively small per-capita federal tax burden partially because Utah has such large families. The Governor’s 2003 Economic report shows that in 2000 Utah had an average household size of 3.13 persons — the largest in the Nation. A larger household with non-wage earning children reduces Utah’s federal tax burden because children do not pay taxes. Utah’s comparatively large population of non-wage earning children is reflected in the Governor’s 2003 Economic report that shows in 2000, Utah’s per capita personal income was $24,180—46th lowest.
Utah’s middle of the pack 24th ranking reflects federal taxes and receipts. This is quite different from the heavy burden Utah taxpayers pay in state and local taxes, which according to the latest figures from the Census Bureau’s State and Local Government Finance report shows that as a percent of personal income Utah was 9th highest in FY2000.