Kentucky counts on federal tax dollars more than most states

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Billions in federal taxpayer dollars have flooded into states over the past year, and more is on the way, but not every state is equal when it comes to dependency on federal money.

In a new study from WalletHub released Wednesday, Kentucky ranked as a state that counts on federal tax dollars significantly more than most, and individual Kentuckians didn’t fare any better.

The personal finance website ranked states across two areas: state residents’ dependency and state government dependency. Residents’ dependency measured an individual’s return on federal taxes paid and a state’s share of federal jobs. It also examined federal funding as a share of state revenue.

Kentucky ranked fourth in relying on federal funds, according to the study, while individual Kentuckians were among the most federally needy people in the country, ranking fifth in reliance on federal tax dollars.

State government was a little better, ranking eighth, meaning its dependence on federal funds is higher than most other states.

Kentucky also ranked 48th in states receiving the highest amount of other federal assistance.

“Federal assistance to states has come into the spotlight recently during the coronavirus pandemic, where some states have received far more money per (COVID-19) case than others,” John Kiernan, WalletHub manager editor, wrote in the report. “For example, in the initial $150 billion given to states from the stimulus package, which was allocated by population, New York got less than $24,000 per positive case while Alaska received over $3.3 million.”

The report also showed red states are altogether more reliant on federal funding than blue states, which rank 30.32 on average.

The report confirmed least-wealthy states tend to receive the most federal support. Also, states with higher tax rates needed less federal help, while states with lower rates needed more. Illinois, for example, has the highest tax rates in the nation but ranked 43rd in federal need. Alaska, which has the lowest tax rate, was the second most federally dependent state.

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