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states most dependent on the federal government

Many taxpayers fret over where their hard-earned money goes once they’ve paid their share of taxes. This is true for residents of all states. But some states get a better deal when it comes to income taxes paid and benefits received. These states, and their economies, rely on the federal government for support to a greater extent than other states. Below we rank the states most dependent on the federal government.

In order to rank the states most dependent on the federal government, we looked at four factors. We looked at percent of state government revenue which comes from the federal government, the percent of workers employed by the federal government, the quality of federal jobs and the ratio of income taxes paid compared to money received from the federal government.

Key Findings

  • Southern states are more reliant – According to our data, Southern states are more reliant on the federal government than Northern states. Our top five for example has three Southern states and only one Northern state. The five states least dependent on the federal government include two New England states and no Southern states.
  • Federal jobs pay well  In general, federal jobs tend to pay well. The average federal worker earns 1.9 times what the average worker earns across our top 10 states. These jobs tend to be relatively rare, though. Only in Maryland does the percent of the workforce employed by the federal government exceed 10%.

states most dependent on the federal government

1. New Mexico

Just under 6% of the New Mexico workforce works for the federal government. A large number of these workers are in the military. The National Park Service, United States Forest Service and the United States Bureau of Land Management are also prominent employers.

Compared to the average job, working for the federal government is a good gig. The average federal worker in New Mexico earns over twice as much as the average private sector worker. This state also has the second-highest ratio of federal funding to income taxes paid in our study.

2. West Virginia

Over 35.5% of West Virginia’s government revenue comes from money from the federal government. That’s the 15th-highest number in our study. Not only does the federal government provide a large chunk of the state’s budget, a large portion of the West Virginian workforce works for the federal government. The state ranks sixth for share of workers employed by the federal government.

The jobs the federal government provides tend to be some of the best, as well. The average federal government employee in West Virginia makes 2.1 times what the average private sector worker earns.

3. Alabama

About 35.9% of the Alabama state government revenue is provided by the federal government. Alabama also scored high on this study because of the workforce’s dependence on the federal government. Around 3.3% of all workers work for the federal government.

These workers also tend to be some of the best paid. The typical federal government employee makes almost 2.2 times as much as the median private sector worker in Alabama.

4. Mississippi

No state government is more reliant on federal funding than Mississippi. Almost 43% of the state government revenue comes from the federal government. Mississippi residents also do not pay much in taxes relative to the support they get from the federal government. For every dollar Mississippi sends in income tax, they get back $2. In both of these metrics Mississippi ranks first.

5. Vermont

Vermont ranks high in terms of federal funding compared to income taxes paid. For every dollar Vermont sends to the federal government the state gets back $1.14. In that metric, the Green Mountain State ranks sixth.

Federal government employees are also big producers in the state’s economy. According to our data, the average federal government employee makes 1.89 times what the average worker earns. Vermont ranks eighth in that metric.

6. (tie) Montana

Montana is home to many of America’s favorite national parks. These parks are primarily managed by the federal government meaning large chunks of the Montana workforce are employed by the federal government. In total 3.3% of all workers are employed by the federal government, the eighth-most in our study.

The state also has top 10 scores in percent of state revenue provided by the federal government and federal funding compare to income taxes paid.

6. (tie) Tennessee

Just over 38% of the revenue the state government of Tennessee takes in comes from the federal government. In that metric, Tennessee ranks ninth. Tennessee also scores highly because the federal government provides high-paying jobs. The average worker for the federal government earns 1.95 times what the average person in the private sector workforce earns.

However Tennessee only ranks 27th for income taxes paid relative to federal funding to the state government. That’s also the lowest rank in the top 10.

8. Idaho

Idaho ranks in the top half for three out of our four metrics. In particular, Idaho ranks high because of the pay federal government workers earn, compared to the average worker. The average federal government employee here earns 2.12 times the average private sector worker earns.

In total there are about 21,300 federal government employees in Idaho, or 2.8% of the overall workforce.

9. Arizona

Just under 41% of the Arizona state revenue comes from the federal government. In total the federal government sends Arizona over $12.7 billion. There are also 71,000 federal employees out of a total workforce of 3.03 million. That means about 2.5 out of every 100 workers is employed by the federal government.

10. Kentucky

Just under 40% of the Kentucky state revenue comes from the federal government, a top 5 rate. Residents here also get quite a bit of bang for their income tax buck. According to our data, Kentucky gets about $1.25 for every dollar in income tax it sends to the federal government.

One area this state is not dependent on the federal government is in employment. This state ranks below average in both of our federal government employment metrics.

states most dependent on the federal government

Data and Methodology

In order to find the states most dependent on the federal government, we looked at data for all 50 states. Specifically, we looked at the following four factors:

  • Federal share of state government revenue. This is the percent of the state government’s revenue which comes from the federal government. Data comes from the U.S. Census Bureau’s 2015 Annual Survey of State and Local Finances.
  • Ratio of federal funding to income taxes paid. This is the revenue the federal government gives to the state government divided by the amount of income tax paid by the state. Data comes from the U.S. Census Bureau’s 2016 1-Year American Community Survey and the IRS Individual Income and Tax Data for 2015.
  • Percent of workers employed by the federal government. This is the percent of the overall workforce employed by the federal government. Data comes from the U.S. Census Bureau’s 2016 1-year American Community Survey.
  • Ratio of federal wage to private sector wage. This is a federal government employee’s median earnings divided by a private sector worker’s median earnings. Data comes from the U.S. Bureau’s 2016 1-year American Community Survey.

We ranked each state in each metric. Then we found each state’s average ranking. We then used this average ranking to create our final score. The state with the best average ranking received a 100. The state with the worst average ranking received a 0.

Tips for Filing Your Taxes

Many people fret about filing their taxes. Often, they put it off to the last minute. Don’t do that. By waiting you delay getting your tax refund, which is money you could potentially invest. Another problem with waiting until the last minute is that you increase your chances of making a mistake on your forms.

If you are up against the deadline, it probably makes sense to take the safe route and file for an extension. If your return is not ready for the April 15 deadline, you can e-file your six-month extension using the IRS’ Free File program.

Your tax situation might not be that complicated. In that case you may not need to hire an accountant to help you file your taxes. In fact most Americans use online tax-filing software. We reviewed the best free tax software here.

Questions about our study? Contact us at press@smartasset.com.

Photo credit: ©iStock.com/uschools

Derek Miller, CEPF® Derek Miller is a graduate of the University of Edinburgh where he studied economics. He is passionate about using data to help people make better financial decisions. Derek is a Certified Educator in Personal Finance® (CEPF®) and a member of the Society of American Business Editors and Writers. He is a data journalist whose expertise is in finding the stories within the numbers. Derek's writing has been featured on Yahoo, AOL, and Huffington Post. He believes the biggest financial mistake people make is waiting too late to save for retirement and missing out on the wonders of compounding interest. Derek lives in Brooklyn.
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