Distribution of Federal Taxes and Expenditures: Urban Vs. Rural States

Elliott Dubin

doi:10.52324/001c.9181

Abstract

The spatial allocation of federal expenditures and tax burdens has changed dramatically during the 1980s because of major changes in federal budget priorities and significant changes to the Internal Revenue Code. This study examines changes in the regional net flow of federal funds (the difference between federal expenditures within a region and federal tax burdens borne by the residents of that region) for the periods 1981-83 and 1987-89. The major findings of this study are that federal fiscal activities moderately redistribute resources from higher to lower income regions, and that, with some exceptions, changes in the net flow of federal funds by region have been due to changes in the geographic distribution of federal tax burdens.

Highlights

In 1990, federal expenditures were approximately 23 percent of Gross National Product (Bureau of Economic Analysis 1991, 7, 12)
Using a typology of states developed by the Economic Research Service of the U.S Department of Agriculture, this study focuses on the changes in the net flow of federal funds in urban and rural states in general, and in farm-dependent, low-income, and retirementdestination states in particular
This study examines the geographic distribution of federal expenditures for the fiscal1981-83 period and fiscal1987-89 period

Summary

Introduction

In 1990, federal expenditures were approximately 23 percent of Gross National Product (Bureau of Economic Analysis 1991, 7, 12). Federal expenditures are obviously an important factor shaping a region's economy. Federal expenditures affect, to some extent, a region's economic development and income level. Defense expenditures are relatively concentrated geographically, and strongly affect those areas heavily dependent on federal purchases or defense wages and salaries. Federal farm assistance payments affect those places dependent on agriculture. The geographic portability of Social Security benefits and federal pensions allows retirees to live in places of their choice, affecting the demographic and economic development of areas receiving these migrants

Objectives

Methods

Findings

Conclusion