WASHINGTON – For every dollar a Marylander paid in federal taxes in 1999, the state got back $1.29 in federal spending, according to a study released this week.
The study by the Northeast-Midwest Institute said that while Maryland had one of the highest federal tax burdens per capita in the nation, that was offset by heavy federal spending in the state.
The federal government spent $42 billion in Maryland in 1999 on contracts, salaries, grants, Social Security benefits and procurement. When other non-state payments are included, such as foreign aid and debt payments, the adjusted federal spending in Maryland was $9,882 per person in 1999, according to the report.
That was well above the adjusted national per capita spending average of $6,569. Only Alaska and Virginia had higher adjusted federal spending rates.
But Maryland also had the fifth-highest federal tax burden in the nation at $39.6 billion, or $7,663 per person compared to the national average of $6,569.
The resulting $1.29 return on the federal tax dollar in Maryland was the 17th-highest in the country. That was down slightly from its 1998 return of $1.33, but experts said it still showed the powerful economic influence of Maryland’s proximity to the nation’s capital.
“The proximity to Washington, D.C., which results in more federal jobs, dramatically affects the federal spending on salaries and wages,” said Matt Kane, policy analyst for budget issues at the institute and one of the authors of the report.
“The federal money spent on salary and wages in Maryland is almost three times the national mark,” said Kane. “The federal procurement in the state is also very high…more than three times the national average. That also has to do with the geographic location of the state.”
A spokeswoman for Gov. Parris Glendening acknowledged the “unique position of the state” in relation to its success in winning federal dollars, but she claimed that much of that spending had to with the administration’s priorities.
“The governor’s priorities are very much in sync with those of the Clinton-Gore administration,” said Michelle Byrnie, the Glendening spokeswoman. “Be it education, environment or healthcare, the emphasis given by the two governments is similar. That has got a lot of additional federal money into the state.”
While total federal spending in Maryland was high, the state was in the middle of its neighbors when it came to the return on its federal tax dollar. Virginia, which had higher overall federal spending, and West Virginia, which had a lower tax burden, both got a better return than Maryland. Pennsylvania and Delaware both had sharply lower returns.
Experts said Maryland’s relatively high federal taxes are just the “higher prize a wealthier state has to pay.”
“The federal tax is uniform in all states. So it’s simple: the higher the income, the higher the federal tax you pay,” said Steve Hill, director at Maryland Budget and Tax Policy Institute.
“It’s just the prize a wealthy state has to pay. A person in Mississippi for example, should not feel too happy because he or she is paying a smaller amount in federal tax compared to a Marylander,” Hill said. “It just means that a person in Maryland enjoys a higher income.”
Kane agrees, but argues that the federal tax is more of a burden for a wealthy state like Maryland. Higher income, he said, means a higher cost of living.
“The standard of living in Maryland is definitely more expensive when compared to a state like Mississippi,” Kane said. “For example, the price of land will be much higher in Maryland…so will be the cost of other overheads.
“So while it’s true that the federal tax system depends on how progressive a state is, it doesn’t in anyway mean that higher incomes make it easier for the citizen,” Kane said. “The tax burden, in all probability, is only greater for a wealthy state like Maryland.”