Document

Federal Finance Issues that Affect the States Sam Rosen-Amy August 2014

Federal Spending in the States

Main Types of Federal Spending in the States • Grants • Contracts • Salaries and wages • Direct payments • Retirement • Non-Retirement

Federal Spending in the States FY 2010 outlays relative to state GDP 40% 36% 35% 30%

25%

22%

20% 15%

12%

10% 5% 0% New Mexico

South Dakota

Michigan

Kansas

Ohio

Retirement and Disability Payments Grants Salaries and Wages

National National AAverage Average

Nebraska

New York

Delaware

Medicare and other Direct Payments Procurement

Source: Pew analysis of the U.S. Census Bureau’s Consolidated Federal Funds Report data.

Federal Grants as Share of States’ Revenues FY 2012 50% 45% 45% 40%

35%

32%

30% 25% 20%

20% 15% 10% 5%

0%

Mississippi

Missouri

Ohio

Iowa

National Average

Pennsylvania

Source: Pew analysis of the U.S. Census Bureau’s Annual Survey of State Government Finances data.

Illinois

Alaska

Federal Grants as a Percentage of State Revenues 1961-2012 40%

35.4% 35% 30% 25% 20%

15% 10% 5% 0%

Recessions

United States

Source: Pew analysis of the U.S. Census Bureau’s Annual Survey of State Government Finances data.

Federal Grants to States Over Time Total Budget Authority, Adjusted for Inflation Base FY 2008 60%

Percent Change from FY 2008

50%

40%

30% 18%

20%

10%

0% FY 2006

-10%

FY 2007

FY 2008

FY 2009

Recession

Source: Pew analysis of Federal Funds Information for States data.

FY 2010

FY 2011

FY 2012

FY 2013

FY 2014

Trends in Federal Grants to States Change in FY 2008 to FY 2014 Total Budget Authority, Adjusted for Inflation

Source: Pew analysis of Federal Funds Information for States data.

Federal – State Tax Connections Mark Robyn August 2014

Federal-State Tax Connections

Statutory links between state and federal tax codes

Assistance through the federal tax code

Economic impact

Federal-State Tax Connections

Statutory links between state and federal tax codes

Assistance through the federal tax code

Economic impact

Conformity Pros

Cons

• Simplicity

• Revenue

• Compliance

• Uncertainty

• Ease of administration

Conformity: Starting Points

Conformity: Types of Provisions Deductions

e.g.:

Itemized Deductions

Credits

e.g.:

Earned Income Tax Credit

e.g.:

Child Care Credit

Federal-State Tax Connections

Statutory links between state and federal tax codes

Assistance through the federal tax code

Economic impact

Federal Support to States Through the Tax Code Federal deduction for state and local taxes paid • Reduced taxes by $45 billion

Federal exclusion of interest on state and local bonds • Reduced taxes by $26 billion

Federal-State Tax Connections

Statutory links between state and federal tax codes

Assistance through the federal tax code

Economic impact

Geographic Distribution: Mortgage Interest Deduction Average deduction per tax filer, by state, 2011

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