Kentucky Receives More Federal Money Than It Sends to Washington --

Is This A Good Deal?

by Theresa Fritz Camoriano

It has been suggested by some in the press that federal taxes are a great deal for Kentucky, since the state receives approximately $1.10 for every $1 its taxpayers pay in federal taxes.  While, to the untrained eye,  this does appear to be a great bargain, a closer look reveals a very different story.  Let’s consider just three aspects of the question, and then decide.  

First, when considering the benefits from tax money spent by the federal government, we must ask how much bang the federal government gets for its buck as compared with private enterprises.  For example, in the area of education, it costs about twice as much to educate a child in a government school as it does in a private school, and the private school usually achieves superior results.  In the area of aid to the poor, federal programs spend about two-thirds of their money in overhead, with about one third going to poor people, while in private charities about two-thirds of the money spent actually gets to the poor people, with only about one-third going to overhead.  So, for every $1 of government money spent on education, students receive about  fifty cents worth of private sector education, and for every $1 of government money spent on helping poor people, the poor people get about fifty cents worth of the benefits they would receive if the same dollar were spent in a private program.  This means that, in order for Kentucky to begin to break even in terms of bang for its buck, it would have to receive at least $2 back for every $1 it sends to Washington.  Receiving $1.10 back for every $1 sent in does not even come close to buying the amount of benefits that  could be provided if that money were being used by private enterprises.

Second, when considering the benefits from money spent by the federal government, we must ask whether the federal tax money that is spent in Kentucky is being spent on the things Kentuckians value most highly.  For example, would most Kentuckians voluntarily put one million dollars of their own money into a new habitat for gorillas (See Gorillas in Our Midst – We Want Our Silver Back), or would they choose to use their money for something else that they value more highly?  When the money is taken and spent through government force, we lose the ability to make those choices.  So, even if the money is spent very efficiently to build a lovely gorilla habitat, most Kentuckians, who probably will never even see the gorilla habitat, probably would have chosen to spend their money elsewhere if given the option.  Thus, the $1.10 of benefits Kentuckians received in gorilla habitat for each $1 they sent in taxes probably would have been of more value to  Kentuckians if it were spent on a road that would make their commute shorter or on medical care for a child or even for a lobster dinner, which at least they would get to eat! 

Third, when considering the benefits of tax money, we must remember that tax money is stolen money, albeit taken through legal means.  When money is taken by force from the person to whom it belongs and is used to benefit someone to whom it does not belong, that is theft.  If a thief steals $1 of your money and then spends $1.10 to help an old lady in Kentucky, is that a good thing?  We have already shown that, if you had wanted to spend your money to help that old lady, you could have gotten twice the bang for the buck that the government gets.  However, even if the old lady received as much benefit from your stolen dollar as she would have received if you had spent that dollar voluntarily on her behalf, stealing is wrong and should not be condoned, whether it is being done by a common thief or by a thief wearing a three-piece suit and answering to the name of “Congressman”.   Systematic stealing from productive people reduces their ability and even their desire to be productive in the future.  Using stolen money to reward those who did not earn the money creates serious problems of dependency and inefficiency.  Stealing money from those who produced it prevents the producers from being able to use their resources for the things they truly value most highly, and it prevents those resources from being used in true charitable service to those in need. 

No, thanks.  Receiving $1.10 back for every $1 we send to Washington is no bargain for Kentucky.  We would be far better off to leave the money in the pockets of the taxpayers, who know very well what they value most highly and are very capable of spending their own money for the purposes they hold most dear.