You probably hear often that Illinois pays more to the federal government than it gets back. That’s often reinforced by Illinois politicians and progressive commentators who like to ask for help or deflect blame because the state is a net “giver” or “donor” – that its people and businesses hand more to the federal government than comes back to the state in federal spending.
But it’s not true. Illinois is a taker, not a giver. Studies show that Illinois’ balance of payments with the federal government has been positive for at least a couple years, a reversal from years past. And the newest studies show that the positive balance of payments is growing compared to other states. Illinois is more of a taker than ever before.
The Rockefeller Institute and the Comptroller of the State of New York recently released their annual studies of the balance of payments between states and the federal government. They are the only regular studies on the subject and the most cited. They tally up all taxes and other payments made by residents of each state and compare that to the total that comes back to the state through grants, contract payments, military spending, social programs, and everything else. Their new work covers 2020, the latest year for which the data are available.
That was an exceptional year, however, because the gusher of federal “pandemic relief” started that year, making all states net takers for the first time on record. Nevertheless, the results for 2020 and the trend from previous years are clear from both studies: Illinois increasingly gets back more from the federal government than it sends in.
Here is what the two new studies found:
The Rockefeller Institute found that Illinois had a positive per capita balance of payments with the federal government of $6,604 in 2020. That ranked Illinois 43rd highest among other states for a surplus, up from 41st in 2019. In other words, Illinois became a bit more of a taker state in 2020. Rockefeller’s chart of other states for 2020 is shown in its interactive graphic here.
Looking at those numbers in another way, Rockefeller says Illinois got back $84 billion more from the federal government than it put in. That’s $1.64 from the federal government for every dollar put in.
Rockefeller also provides a six-year total. Illinois’ positive balance of payments in 2019 and 2020 more than exceeded the total negatives for the previous four years. On average, over the six years, Illinoisans got $864 more back from the federal government than they put in.
Finally, and most importantly, Rockefeller did the same per capital analysis without including COVID relief money. It found that Illinois was still a net taker, with a $1,950 positive balance of payments per person.
The New York Comptroller study is less comprehensive but reached very similar results for 2020. It also showed all states getting back more money from the federal government than they received in 2020.
It found that Illinois’ per capita balance of payments surplus with the federal government was $6,321 in 2020, giving it the 45th highest surplus compared to other states. That meant a total surplus of $80 billion for Illinois. All those numbers are very close to Rockefeller’s findings. However, the New York Comptroller’s numbers have differed somewhat from Rockefeller’s numbers in earlier years. It showed Illinois with a small per capita surplus of $883 in 2019. But a close look behind the numbers, which we did in 2020, had already indicated clearly that Illinois had become a taker state.
Two important observations are in order.
First, the numbers don’t actually mean anything strictly in terms of fairness among states, despite persistent, hypocritical claims by progressives to the contrary. That’s because the biggest reason why some states send more to Washington is progressive federal tax rates.
Big earners pay more in taxes at higher rates, so richer states like Illinois, New York and Connecticut naturally pay much more to the federal government. “A state that has a disproportionately large percentage of high-income earners (such as New York) will inherently pay more in Federal personal income taxes,” as the Rockefeller study says.
Yet it has been progressives in progressive states who routinely complain that they are “donors.” Illinois Gov. JB Pritzker, Comptroller Susana Mendoza, and Chicago Mayor Lori Lightfoot have been among the complainers, which we wrote about earlier. If it were true that Illinois was getting shorted, what they were actually complaining about is progressive tax rates; they were asking for the higher taxes paid by the rich to be returned to the state. Now, it turns out that their premise isn’t even true.
Second, the trend toward Illinois taking back more than it sends to Washington is no surprise because Illinois’ tax base is fleeing.
Just look at the latest migration numbers from the Internal Revenue Service that we reported last week. Illinois lost, on the net, another 101,000 taxpayers and their dependents to other states in 2020 alone, losing a net $8.5 billion in taxable income (AGI) to other states 2020 – a new record. That was the third-worst performance in the country.
And it’s higher earners who are fleeing. The Illinoisans who fled in 2020 earned, on average, $30,600 more than the residents of Illinois gained from other states. Outgoing residents earned $106,000, while incoming residents made just $75,000. That’s the biggest gap since at least 2000 and a continuation of a growing trend.
Without radical reforms, the trend will continue. Illinois will become poorer relative to other states and increasingly dependent on federal handouts.
*Mark Glennon is the founder of Wirepoints
