ROANOKE TIMES
Copyright (c) 1996, Roanoke Times
DATE: Tuesday, October 8, 1996 TAG: 9610080092
SECTION: NATIONAL/INTERNATIONAL PAGE: A-1 EDITION: METRO
DATELINE: WASHINGTON
SOURCE: The New York Times
NOTE: Below
Many states in the Northeast and the Midwest pay more in federal taxes than they receive in federal spending, while many Southern states, including Virginia, are subsidized by the federal government, a new study shows.
Connecticut and New Jersey were the biggest ``donor states'' last year, and New York consistently has been among the large donors.
Virginia, New Mexico and Mississippi had the biggest surpluses, receiving far more in federal outlays than they paid in federal taxes.
The study, by researchers at the Kennedy School of Government at Harvard University, said that Connecticut's tax payments to the federal government exceeded federal spending in the state by an average of $2,099 for each resident last year. New Jersey had a deficit averaging $1,883 for each of its residents, while New York had an average deficit of $978 for each resident.
The report, issued by Sen. Daniel Patrick Moynihan, D-N.Y., concludes that ``the federal government is a major force in the geographic distribution of economic activity,'' though sometimes in ways that were not foreseen or intended.
The study measures the ``balance of payments'' for each state, defined as the difference between the federal spending it receives and the taxes it pays.
Moynihan did the first such study 20 years ago to support his contention that New York had, in some ways, been treated unfairly. Since 1992, the body of the report has been prepared by Harvard researchers.
The latest study examines the flow of federal money to and from all states and disavows any premise that states should get back precisely as much as they pay to the federal government. Indeed, the authors said, some redistribution of resources is inherent in the concept of America as a union of states in which people and commerce move freely across state borders.
The report made these points:
``New Jersey, with high per-capita incomes and federal tax payments, receives relatively little in the way of federal expenditures.'' The state is not a major center of military spending and, with a comparatively low poverty rate, receives a small share of federal welfare spending.
With income levels far exceeding the national average, ``Connecticut residents consistently lead the nation in federal taxes paid'' per capita. ``As a result, Connecticut contributes far more in taxes than it receives back in federal spending.''
In the past decade, four New England states (Connecticut, Massachusetts, New Hampshire and Vermont) and three Western states (California, Hawaii and Washington) experienced significant changes for the worse in their balance of payments with the federal government.
New York regularly ranks among the top states in federal tax payments, ``a direct result of high per capita income.'' But it is consistently below the national average in the amount of federal spending it receives for each resident.
House Speaker Newt Gingrich said last year that New York could not expect the federal government to subsidize its ``culture of waste.'' But Moynihan said the new data showed that things were really the other way around: New York has been subsidizing Gingrich's Georgia and other Southern states for years.
Southern and Sunbelt states have a different perspective. Elizabeth G. Schneider, executive director of the Southern Governors' Association, said it was natural that the South should get a large portion of federal spending because many people chose to retire there. In addition, she said, the region has a higher poverty rate than the rest of the country and has many military bases.
Debby K. Kilmer, director of the Washington office for the state of Florida, said that Southern states generally paid more in gasoline taxes than they received in federal money for construction of highways. With the South and the West growing faster than Northeastern states, she said, it is proper that ``dollars should follow the people.''
The study finds that military spending, though cut in recent years, remains important in determining the balance of payments for many states. Federal benefit programs have become more important, but payments to the elderly, not the poor, account for the bulk of this spending.
The net influx of federal money accounted for more than 10 percent of per capita income in New Mexico, Mississippi and Virginia, the study said. Virginia, home to the Pentagon and many naval installations, attracted large amounts of military spending. New Mexico's nuclear weapons industries also attracted large sums of federal money. Mississippi had a large surplus because, with low incomes and a high poverty rate, it generates a relatively small amount of taxes and receives large amounts of federal aid.
LENGTH: Medium: 88 linesby CNB