What factors influence the federal tax burden distribution across states?

1. Why some states “pay” more: concentration of high incomes and big populations make the difference

High aggregate federal tax contributions are driven by where high incomes and large workforces are located. California, New York, Texas, and Florida account for outsized shares of federal receipts because they house the largest populations and many high-income taxpayers; California alone provided 15.9% of federal revenue in one FY snapshot ^[3]. At the same time, national analyses show the top 1% pay nearly half of federal income taxes, so states with greater shares of those top earners (e.g., New York, California) will naturally generate higher federal revenue per capita and in total ^[2]. This concentration explains why some smaller, wealthy states also show high per-capita contributions; Massachusetts and Nebraska were cited as sending more per person than expected ^[3]. The pattern is not primarily about state tax policy but about income distribution and population scale.

2. Why other states “receive” more: federal spending priorities and local dependence on federal dollars

States with lower incomes, strategic federal installations, or larger beneficiary populations typically receive more federal spending than they send in taxes, creating clear redistribution patterns. The Tax Foundation’s 2006 analysis —still cited for its geographic pattern findings— shows New Mexico, Alaska, and West Virginia receiving substantially more federal dollars than they paid, with New Mexico’s federal spending-to-tax ratio at 2.00 ^[1]. Contemporary datasets echo this: 31 states plus DC were net recipients in one recent accounting, while 19 states were net contributors ^[3]. Federal outlays such as Social Security, Medicare, Medicaid, defense contracts, and farm supports concentrate in particular states or demographic groups; program composition and federal agency siting therefore drive net inflows as much as tax collections do.

3. State tax structure matters, but mostly for migration and business location, not federal receipts directly

State-level tax systems —rates, brackets, exemptions, and whether a state conforms to federal rules— influence who resides in a state and where businesses locate, which indirectly affects federal tax flows. The State Tax Competitiveness Index highlights that low-rate, neutral systems attract business and can spur growth; top-ranked states include Wyoming, South Dakota, and New Hampshire ^[4]. Separate 2024–2025 surveys show 42–43 states levy individual income taxes with widely varying top marginal rates, from flat low rates to California’s 13.3% top rate ^{[6] [7]}. Those structures affect state-level income composition over time, but they are not the dominant driver of federal tax receipts, which hinge on underlying economic size and high-income concentration; nevertheless, tax competitiveness influences long-run fiscal and demographic trends that feed back into federal burden distribution.

4. Who bears the burden within states: the top 1% dominate federal income tax payments

Across states, the wealthiest taxpayers shoulder a disproportionate share of federal income taxes. A September 2024 report found the top 1% paid nearly 46% of all federal income taxes, and in every state the top 1% pay a higher share of federal taxes than their share of adjusted gross income —Wyoming’s top-1% paid nearly 62% of income tax in that state’s distributional snapshot ^[2]. Conversely, the bottom 50% of earners contribute a small share of income taxes in every state, sometimes under 2% as in Florida. These distributional facts shape the narrative that federal taxation is progressive at the income level and help explain why affluent, high-income states appear to “pay more” even when accounting for population size ^[2].

5. Data disagreements and methodological tradeoffs: watch definitions and timeframes

Different studies use varied metrics —gross collections, per-capita receipts, spending-to-tax ratios, or burdens combining state and federal taxes— and produce different portraits. The Tax Foundation comparisons (older but still cited) emphasize spending-to-tax ratios by state ^[1], while USAFacts and other 2024–2025 compilations present FY 2024 gross federal collections and net gaps between what states send and receive ^{[3] [5]}. WalletHub and state-competitiveness projects focus on state and local burdens or tax structure, which can conflict with federal-centric measures ^{[8] [4]}. Method choice dictates the headline: “net contributors” vs “highest per-capita senders” vs “highest burdens” can point to different states depending on whether the analysis prioritizes federal receipts, federal outlays, or combined tax burdens.

6. Policy implications and competing agendas visible in the data

Analyses emphasizing redistribution —like the Tax Foundation’s spending-to-tax ratios— are often used to argue that federal policy shifts resources toward lower-income or less-populous states, which can support calls for reforms in federal grant formulas ^[1]. By contrast, reports highlighting that the top 1% pays nearly half of income taxes are used to argue that the wealthy already carry a large share of the load, cautioning against further progressive federal rate hikes and emphasizing state tax reliefs or competitiveness ^[2]. Studies promoting state tax competitiveness stress low, neutral taxes to attract business and growth ^[4]. Each framing aligns with different policy goals, so readers should note that the same underlying data can support distinct, often partisan, prescriptions depending on which metrics are foregrounded.