It’s Not About Revenue

Sadly, the first remedy that Governor Brown has proposed to California's budget woes has been to raise taxes. A fellow Californian complains here that "California has a spending problem, not a tax-revenue problem." That sounds right to me, but when something seems right to you, that's time to go do a little research and engage in a little critical thought. What I came up with was an experiment to look up the revenues of the various states and compare them to the populations, to find out how much money each state takes in per resident. I figured, in agreement with the linked author, that California would probably have among the highest amounts of revenue per citizen in the nation.

State revenue data was located here. I also used Wikipedia's reporting of the 2010 census results for population. The rest was math and sorting. Here's what I came up with:

State	FY 2010 revenue	2010 population	Revenue per citizen
DC	$21,900,000,000	601,723	$ 36,395.48
Alaska	$13,600,000,000	710,231	$ 19,148.70
Delaware	$15,200,000,000	897,934	$ 16,927.75
Wyoming	$8,200,000,000	563,626	$ 14,548.65
West Virginia	$24,400,000,000	1,852,994	$ 13,167.88
New York	$212,700,000,000	19,378,102	$ 10,976.31
Massachusetts	$70,300,000,000	6,547,629	$ 10,736.71
North Dakota	$7,000,000,000	672,591	$ 10,407.51
Rhode Island	$10,800,000,000	1,052,567	$ 10,260.63
Nebraska	$17,300,000,000	1,826,341	$ 9,472.49
California	$341,700,000,000	37,253,956	$ 9,172.18
New Jersey	$79,000,000,000	8,791,894	$ 8,985.55
Colorado	$44,800,000,000	5,029,196	$ 8,907.98
Washington	$57,000,000,000	6,724,540	$ 8,476.42
Kansas	$22,600,000,000	2,853,118	$ 7,921.16
Connecticut	$27,900,000,000	3,574,097	$ 7,806.17
Minnesota	$40,800,000,000	5,303,925	$ 7,692.42
Pennsylvania	$96,500,000,000	12,702,379	$ 7,597.00
Hawaii	$10,300,000,000	1,360,301	$ 7,571.85
Ohio	$87,200,000,000	11,536,504	$ 7,558.62
Oregon	$28,900,000,000	3,831,074	$ 7,543.58
Nevada	$19,600,000,000	2,700,551	$ 7,257.78
Florida	$136,300,000,000	18,801,310	$ 7,249.49
Vermont	$4,500,000,000	625,741	$ 7,191.47
Iowa	$21,800,000,000	3,046,355	$ 7,156.09
North Carolina	$67,400,000,000	9,535,483	$ 7,068.34
Utah	$19,400,000,000	2,763,885	$ 7,019.11
Maryland	$39,500,000,000	5,773,552	$ 6,841.54
Illinois	$87,600,000,000	12,830,632	$ 6,827.41
Tennessee	$43,100,000,000	6,346,105	$ 6,791.57
Wisconsin	$38,200,000,000	5,686,986	$ 6,717.09
Virginia	$53,700,000,000	8,001,024	$ 6,711.64
Texas	$166,600,000,000	25,145,561	$ 6,625.42
New Hampshire	$8,700,000,000	1,316,470	$ 6,608.58
Montana	$6,500,000,000	989,415	$ 6,569.54
Maine	$8,700,000,000	1,328,361	$ 6,549.42
Georgia	$63,300,000,000	9,687,653	$ 6,534.09
South Carolina	$29,900,000,000	4,625,364	$ 6,464.36
Louisiana	$29,000,000,000	4,533,372	$ 6,397.00
Indiana	$40,400,000,000	6,483,802	$ 6,230.91
South Dakota	$5,000,000,000	814,180	$ 6,141.15
Arizona	$38,600,000,000	6,392,017	$ 6,038.78
New Mexico	$12,300,000,000	2,059,179	$ 5,973.25
Missouri	$35,500,000,000	5,988,927	$ 5,927.61
Mississippi	$16,900,000,000	2,967,297	$ 5,695.42
Kentucky	$24,600,000,000	4,339,367	$ 5,669.03
Idaho	$8,700,000,000	1,567,582	$ 5,549.95
Oklahoma	$20,400,000,000	3,751,351	$ 5,438.04
Michigan	$52,300,000,000	9,883,640	$ 5,291.57
Arkansas	$15,300,000,000	2,915,918	$ 5,247.06
Alabama	$24,400,000,000	4,779,736	$ 5,104.88

Now, this is looking at all sources of revenue, not just taxes paid by ordinary people. The top of the list is filled with special cases. High direct Federal subsidies and substantial excise or corporate income taxes seem to be a factor – but they aren't universal. Alaska gets a lot of its revenue from excise taxes, because it is a major oil producer, but Oklahoma is also a major oil producer and it is near the bottom of the list.

Consider also the relative financial health of the various states. Here, I can see no relationship. States with serious financial problems, and states with relatively clean bills of fiscal health, are scattered throughout the list.

But the theory is that state government revenues are not high enough, so they need more money – in this particular case, the theory is that the state of California isn't collecting enough money to meet its citizens' needs. In terms of gross revenue, California is far ahead of any other state-level government; in terms of money in per capita, California ranks eleventh out of fifty-one, or tenth if you exclude D.C. I think this roughly but not precisely confirms the proposition that revenue is not the basic problem. The evidence is not as strong on that as I would prefer to confirm my pre-existing bias; the table suggests that the state probably can squeeze some more revenue out of its tax base and may be able to find additional sources of other revenue. But probably not a whole lot more.

The data does roughly support the proposition that revenue is not the issue. There is no relationship between revenue and a state's financial health. There is little relationship between revenue and the kind of sources of that revenue. Factoring out money per citizen, we produce a more-or-less random list of states. It's not about revenue. It's about spending.