Alabama Ranks As One Of Most Federally-Dependent States In U.S.

WASHINGTON, DC - Although Alabama traditionally aligns with conservative politics - which touts a platform of small federal government - the state ranks among those most dependent on federal money, according to a recent study. Alabama ranked fifth overall in the study.

The report, released this week by WalletHub, shows Alabama, Mississippi and Kentucky all among the five states most dependent on Uncle Sam. New Mexico ranked first, followed by Mississippi, Kentucky, West Virginia and Alabama.

In order to identify which states most and least depend on federal support, WalletHub compared the 50 states across three key metrics: return on taxes paid to the federal government; federal funding as a share of state revenue; and share of federal jobs.

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Federal dependency of Alabama (1=Most Dependent, 25=Avg.) ranked as such:

• 5th – Return on Taxes Paid to the Federal Government
• 11th – Federal Funding as a Share of State Revenue
• 10th – Share of Federal Jobs

Part of the reason traditionally Republican states are more dependent on federal money is because of the tax structures in those states, according to some of the study's panelists.

"Traditionally state and local revenues cover state roads, schools and other state services. Federal revenues cover national concerns, however federal revenues also cover shortfalls in many states," said University of Alabama School of Law professor Susan Pace Hamill. "In Alabama, for example, the poorest rural schools rely on federal subsidies for a greater portion of their funding than other school districts. Arguments can be made that these subsidies are equitable, but, at the same time such subsidies validate inequitable state and local tax structures. For example, Alabama’s poorly funded rural schools are a direct result of the largest timber owners paying virtually no property tax."

Hamill said many poorer states such as Alabama not only collect less tax than they could, they are also extremely regressive, imposing disproportionately higher tax burdens on the lowest income residents. "The current system of wealthier states subsidizing poor states with regressive structures indirectly validates those structures, which is also inequitable and encourages bad tax policy," she said.