Economy
Donor States vs. Recipient States: Where Does Your Federal Tax Dollar Go?
Some states send Washington more money than they receive, while others receive considerably more federal spending. Here’s what “donor state” really means—and why the numbers don’t necessarily measure government dependency.
Every year, Americans send trillions of dollars to Washington through income taxes, payroll taxes, corporate taxes and other federal revenues. The federal government then sends trillions back across the country through Social Security, Medicare, Medicaid, military spending, federal salaries, contracts, grants, infrastructure projects and dozens of other programs.
But the money doesn’t necessarily return to the states in the same proportions in which it was collected.
That’s where the terms “donor state” and “recipient state” come in.
What Is a Donor State?
Simply put, a donor state sends more money to the federal government than it receives back in federal spending.
Imagine taxpayers and businesses in a state contribute $100 billion to the federal government during a year. If federal spending within that state totals only $80 billion, the state has effectively contributed $20 billion more to the federal government than it received.
A recipient state experiences the opposite: federal expenditures within the state exceed the amount collected there in federal revenue.
These aren’t official federal government classifications, however. They’re terms commonly used by researchers analyzing the flow of money between individual states and Washington.
Only Three Donor States in 2023?
According to an August 2025 analysis from the Rockefeller Institute of Government using preliminary federal fiscal year 2023 data, only three states had negative balances—meaning they contributed more federal revenue than they received in federal expenditures.
Those states were:
New Jersey: approximately $18.9 billion more contributed than received.
Massachusetts: approximately $6.8 billion more contributed than received.
Washington: approximately $54 million more contributed than received.
At first glance, that might suggest nearly every other state depends financially on those three states.
The reality is considerably more complicated.
COVID Changed the Numbers
Historically, several wealthy states—including California and New York—have frequently appeared on the donor side of the equation.
The enormous federal response to the COVID-19 pandemic disrupted that pattern.
Trillions of dollars in extraordinary federal spending flowed into states through stimulus payments, business assistance, unemployment programs, healthcare funding, state and local government assistance and other programs.
Even after the emergency phase of the pandemic ended, some of those expenditures continued influencing federal balance-of-payments calculations.
That’s one reason examining a single year can produce a misleading picture.
California: Recipient Today, Historical Donor
California provides perhaps the best example.
In fiscal year 2023, California technically received slightly more federal spending than it contributed—approximately $342 more per person.
But look at the longer-term numbers and the picture changes.
Using a nine-year average that excludes COVID-related spending, Rockefeller Institute researchers calculated California’s average balance at approximately negative $29 billion.
In other words, over a more typical period, California has historically contributed substantially more to the federal government than it received.
Its enormous economy, high incomes and large number of taxpayers generate tremendous amounts of federal revenue.
New York Tells a Similar Story
New York has also historically ranked among America’s major donor states.
Yet in 2023, New York had a positive federal balance of approximately $13.3 billion, receiving roughly $1.04 in federal expenditures for every $1 it contributed.
Researchers attributed much of the change from New York’s historical pattern to lingering pandemic-era federal expenditures.
As those programs disappear from the calculations, New York could return to its traditional position as a donor state.
Arizona Is a Net Recipient
Arizona presents a different picture.
Over the Rockefeller Institute’s nine-year analysis, Arizona averaged a positive federal balance of approximately $44.5 billion.
Even after excluding COVID-related spending, Arizona’s average remained positive at roughly $35.3 billion.
That means federal expenditures flowing into Arizona have substantially exceeded federal revenue collected from the state.
But that doesn’t mean Arizona simply receives tens of billions of dollars in “welfare.”
Federal spending includes far more than public assistance.
Arizona hosts military installations, federal lands and agencies, defense and aerospace operations, veterans programs and a significant retiree population receiving Social Security and Medicare.
All of those expenditures count toward the state’s federal balance.
Texas Receives More Than It Sends
Texas also had a substantial positive balance in 2023.
Federal expenditures exceeded revenues collected from Texas by approximately $80 billion, making it one of the country’s largest net recipients in total dollars that year.
Again, the number needs context.
Texas is home to major military installations, NASA operations, defense contractors, federal infrastructure projects and millions of Social Security and Medicare recipients.
Those federal dollars all count as money flowing back into the state.
The Surprising Leader: Virginia
If recipient-state status simply meant dependency on federal welfare programs, Virginia would seem like an unlikely candidate to lead the country.
Yet Virginia recorded the nation’s largest positive federal balance in 2023 at approximately $145.4 billion.
Why?
Location.
Virginia sits next to Washington, D.C., and contains an enormous concentration of federal employees, military installations, government contractors and defense spending.
Neighboring Maryland ranked second with a positive balance of approximately $81.1 billion.
The numbers illustrate why federal balance-of-payments statistics should not automatically be interpreted as measurements of welfare dependency.
A recipient state isn’t necessarily a “welfare state.” Federal expenditures include Social Security, Medicare, military installations, defense contracts, federal salaries, research, infrastructure, grants and other programs.
Where Does the Federal Money Actually Go?
Federal expenditures flowing into a state can include:
- Social Security
- Medicare and Medicaid
- Military bases and personnel
- Defense contracts
- Federal employee salaries
- Highway and transit funding
- Scientific and university research
- Agricultural programs
- Veterans benefits
- Disaster assistance
- Federal grants
- Infrastructure projects
- Federal agency operations
A state containing a large military installation, federal laboratory or government agency can therefore receive billions of federal dollars without that money having anything to do with traditional public assistance programs.
Why Wealthier States Often Become Donors
Federal income taxes are progressive.
People with higher incomes generally pay a larger percentage of their income in federal income taxes.
States containing large concentrations of high-income households and highly profitable companies can consequently generate enormous amounts of federal revenue.
That helps explain why states such as California, New York, New Jersey and Massachusetts have historically appeared frequently among net contributors.
The federal government doesn’t earmark the taxes collected in California exclusively for California.
The money enters the national treasury and helps finance programs throughout the United States.
In that sense, federal taxation intentionally redistributes resources geographically as well as economically.
So Are Donor States “Subsidizing” Recipient States?
In a broad accounting sense, yes.
Federal revenue collected disproportionately from some states helps finance federal expenditures occurring elsewhere.
But describing the relationship simply as one state “paying for” another leaves out important context.
Federal spending follows national priorities rather than state borders.
A Navy base in Virginia protects the entire country. NASA facilities in Texas conduct missions funded by taxpayers nationwide. Social Security benefits paid to a retiree in Arizona may reflect payroll taxes that person paid while working decades earlier in California, Illinois or New York.
Americans and businesses also move between states throughout their lives.
The federal system was never designed to ensure that every dollar collected within a state’s borders would eventually return to that same state.
The Bigger Picture
The donor-state debate is often used as political ammunition, particularly when politicians argue about which parts of the country are supporting others.
The numbers are real, but they require context.
A state can move from donor to recipient status because of a recession, natural disaster, military spending, demographic changes, infrastructure investments or extraordinary events such as the COVID-19 pandemic.
That’s why examining several years of data generally tells us more than looking at a single year.
Ultimately, the donor-versus-recipient calculation reveals something fundamental about the United States:
Federal taxes don’t remain where they’re collected.
They become part of a national pool used to fund programs, obligations and investments across all 50 states.
And depending on where you live, your state may be putting more into that pool—or taking more out—at any particular moment.
Related External Links
- Rockefeller Institute of Government – 2025 Balance of Payments Report
- USAspending.gov – Explore Federal Government Spending
- USAspending.gov – Federal Spending Guide
- IRS – Individual Income Tax Data by State
- IRS – Federal Taxes Collected by State
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The Knowledge
Where Does Federal Money Go? The Biggest Costs Behind the Budget
Where does federal money go? Part two of our National Debt Explained series examines the biggest expenses in the 2025 budget and how spending connects to government borrowing.
Last Updated on October 13, 2026 by Daily News Staff
The Knowledge | National Debt Explained, Part 2
When discussing debt, ask: Who borrowed the money? That question helps distinguish a family’s finances from the federal budget. Our first episode explained why your credit card balance is separate from the national debt. Now comes the next question: What does the federal government spend money on?
Much of it pays for retirement benefits, health coverage, national defense, public services, and interest on previous borrowing.
Social Security was the largest individual program in fiscal year 2025, costing approximately $1.6 trillion. But combine the major health care programs—including Medicare, Medicaid, and health insurance subsidies—and their spending reached about $1.8 trillion, exceeding Social Security alone. cbo.gov
The figures below cover October 1, 2024, through September 30, 2025.Major expense FY 2025 spending What it supports Social Security About $1.6 trillion Retirement, survivor, and disability benefits Medicare, net $988 billion Health coverage for older adults and certain people with disabilities Net interest $970 billion Cost of servicing publicly held federal debt, after subtracting interest income Discretionary defense $893 billion Military personnel, operations, equipment, and research Medicaid $668 billion Federal contribution toward health coverage and care for eligible people
These are selected expenses, not the entire budget. Medicare spending is shown after premiums and other offsetting receipts. The combined health care total already includes Medicare and Medicaid, so it should not be added to those rows. cbo.gov
The government also supports veterans’ health care, transportation, education, housing assistance, courts, law enforcement, scientific research, disaster response, and environmental protection. Nondefense discretionary spending totaled approximately $980 billion in 2025, covering many of these services. Some funding for these areas falls elsewhere in the budget. cbo.gov
Federal spending falls into three broad groups:
- Mandatory spending: Payments governed by existing eligibility rules and benefit formulas, including Social Security and major health programs.
- Discretionary spending: Funding lawmakers control through appropriations legislation, including most defense spending and many public services.
- Net interest: The expense of servicing publicly held federal debt, minus government interest income. cbo.gov
Interest deserves attention because it pays for borrowing already undertaken. In 2025, net interest exceeded discretionary defense spending. Congressional Budget Office
A program’s cost does not automatically translate into an equal increase in national debt. Taxes and other receipts finance much of federal spending. Social Security and Medicare’s hospital insurance program receive dedicated payroll taxes, while Medicare also collects premiums.
In 2025, federal spending totaled approximately $7 trillion, compared with $5.2 trillion in revenue. The roughly $1.8 trillion shortfall was the deficit, requiring borrowing. Understanding national debt therefore means examining both what government spends and what it collects. cbo.gov
Explore more explanations behind the headlines at STM Daily News, home of The Knowledge.
Sources for this episode
- CBO: The Federal Budget in Fiscal Year 2025 — Overview of spending, revenue, deficits, and debt interest.
- CBO: Mandatory Spending in Fiscal Year 2025 — Breakdown of Social Security, Medicare, Medicaid, and other benefit programs.
- CBO: Discretionary Spending in Fiscal Year 2025 — Defense spending and services including transportation, education, and veterans’ health care.
- CBO: Overview of the FY 2025 Budget Infographics — Highlights the largest expenses and broader budget trends.
Related reading
- U.S. Treasury: Understanding the National Debt — What federal debt represents and how borrowing works.
- U.S. Treasury: Understanding the National Deficit — Explains the difference between an annual deficit and accumulated debt.
- U.S. Treasury: Federal Spending — Additional context about where federal money goes.
Daily News
Whose Debt Is the National Debt?
The national debt isn’t Americans’ credit card balances added together. This simple explainer separates federal borrowing from household debt and explains the difference between debt and a deficit.
Last Updated on October 11, 2026 by Daily News Staff
The Knowledge | STM Daily News
When you hear “national debt,” do you picture everyone’s credit card balances added together? The name can create that impression, but the national debt and household debt measure different borrowing.
The U.S. national debt is money the federal government owes. Your personal credit card balance is not included.
Federal debt versus household debt
The Treasury defines national debt as the federal government’s total outstanding borrowing accumulated over the country’s history. Household debt covers borrowing by individuals and families, including mortgages, credit cards, auto loans, and student loans.
|Type of debt |Who borrowed? |Examples |
|————–|————————|————————————————–|
|National debt |Federal government |Outstanding Treasury securities |
|Household debt|Individuals and families|Credit cards, mortgages, auto loans, student loans|
Putting a $500 purchase on your credit card increases your personal balance. It does not add $500 to the national debt.
How does the national debt grow?
When federal spending exceeds tax collections and other revenue, the government runs a budget deficit. Treasury sells securities to borrow money to cover the gap.
Consider a simplified, hypothetical example: the government collects $5 trillion and spends $6 trillion in one year. That leaves a $1 trillion deficit requiring financing.
A deficit measures a shortfall over a period, usually a year. Debt measures outstanding borrowing accumulated over time. Repeated deficits generally increase that debt. Interest on existing borrowing is also a federal expense.
Does paying off your credit card reduce the national debt?
Paying off a card reduces what you owe your lender. It does not directly repay Treasury borrowing. Household debt and government debt can influence the same economy, but they remain separate obligations.
When discussing debt, ask: Who borrowed the money? That one question helps distinguish a family’s finances from the federal budget.
Find more explanations of the ideas behind the headlines at STM Daily News, home of The Knowledge.
Sources
● U.S. Treasury: Understanding the National Debt
● U.S. Treasury: Understanding the National Deficit
● Federal Reserve Bank of New York: Household Debt and Credit Report
Last Updated on September 17, 2026 by Daily News Staff
HOLLYWOOD, Calif. — Paramount’s century-long connection to Hollywood could be facing one of its biggest challenges yet, as the entertainment giant reportedly prepares for the possibility of moving major operations out of California amid an escalating legal battle over its proposed acquisition of Warner Bros. Discovery.
Paramount has informed the offices of Los Angeles Mayor Karen Bass and California Attorney General Rob Bonta that it is prepared to formally announce plans to leave California, according to reporting Wednesday from TheWrap. Paramount has not formally announced a relocation, and a company spokesperson declined to comment to the publication.
The potential move centers on Paramount Skydance’s proposed approximately $110 billion acquisition of Warner Bros. Discovery, a deal being challenged on antitrust grounds by California and a coalition of 11 other states, along with a separate challenge from the Writers Guild of America. California Attorney General Rob Bonta argues that combining the two entertainment companies could reduce competition, potentially leading to higher prices and fewer choices for consumers.
A court agreement currently prevents Paramount and Warner Bros. Discovery from completing the merger until June 1, 2027, or until after a court decision on the states’ claims, whichever comes first. The antitrust case is scheduled for trial in March 2027.
Paramount’s Hollywood Future
At the center of the controversy is Paramount’s historic studio complex at 5555 Melrose Avenue in Hollywood, one of the entertainment industry’s most recognizable properties.
The Los Angeles Times reported that Paramount CEO David Ellison has told associates that he would prefer to remain in Los Angeles. However, Paramount’s board has reportedly approved a contingency plan that could move the company’s headquarters out of Hollywood, and Ellison has indicated that the company is prepared to sell its historic studio properties and relocate operations if the merger remains stalled.
Tennessee, Texas and Georgia have emerged in reports as potential destinations should Paramount ultimately decide to relocate.
The financial pressure is significant. Beginning October 1, Paramount faces a roughly $7 million-per-day additional payment obligation tied to delays in completing the Warner Bros. Discovery transaction. Paramount has asked the federal court to require the states and the Writers Guild of America to post a $1.88 billion bond to cover potential costs associated with the delay.
What’s at Stake for Los Angeles?
A Paramount departure could extend far beyond the loss of a famous Hollywood address.
An economic analysis cited by TheWrap estimates that a large-scale Paramount departure could put as many as 57,980 full-time jobs, $21.2 billion in annual economic output and approximately $1.17 billion in state and local tax revenue at risk. Those figures represent an economic-impact scenario rather than a prediction that all of those losses would necessarily occur.
There are competing concerns about the merger itself. Los Angeles County analysis has estimated that completing the Paramount-Warner Bros. combination could also eliminate thousands of entertainment and related jobs because of consolidation. Opponents of the merger, including entertainment unions, have raised concerns about reduced competition and employment, while supporters argue that reaching a settlement could help prevent Paramount from moving operations out of California.
Mayor Bass has said she remains focused on protecting Los Angeles entertainment jobs and keeping Hollywood’s entertainment industry centered in the city. Bonta’s office, meanwhile, has maintained that California will continue enforcing its antitrust laws while remaining open to good-faith discussions. There is still an opportunity for the dispute to be resolved before Paramount makes a final decision about its California operations. Paramount Skydance and representatives for California Attorney General Rob Bonta are scheduled to participate in court-ordered settlement talks on October 14 and 15. The discussions could potentially resolve the antitrust dispute and clear a path for Paramount’s proposed Warner Bros. Discovery acquisition. For now, Paramount has made no official announcement that it is leaving California. The company declined to comment on reports Wednesday that it was preparing to announce a departure. That leaves the future of Paramount’s Hollywood operations — including its historic Melrose Avenue studio — uncertain as the legal and financial pressure surrounding the merger continues to build. Settlement Talks Scheduled
For now, the gates at Paramount remain firmly planted on Melrose Avenue.
Settlement Talks Scheduled
There is still an opportunity for the dispute to be resolved before Paramount makes a final decision about its California operations.
Paramount Skydance and representatives for California Attorney General Rob Bonta are scheduled to participate in court-ordered settlement talks on October 14 and 15. The discussions could potentially resolve the antitrust dispute and clear a path for Paramount’s proposed Warner Bros. Discovery acquisition.
For now, Paramount has made no official announcement that it is leaving California. The company declined to comment on reports Wednesday that it was preparing to announce a departure.
That leaves the future of Paramount’s Hollywood operations — including its historic Melrose Avenue studio — uncertain as the legal and financial pressure surrounding the merger continues to build.uilding around the Warner Bros. Discovery deal, the question of whether one of Hollywood’s most historic studios will continue calling California home has moved from speculation to a potentially consequential decision for Los Angeles and its entertainment industry.
STM Daily News will continue monitoring the Paramount-Warner Bros. Discovery dispute and what it could mean for Hollywood, entertainment workers and the future of film and television production in California.
Source and Related Reading
- California Attorney General — Agreement Halting Paramount/Warner Bros. Merger — Primary source explaining the states’ antitrust challenge and agreement delaying completion of the merger.
- Los Angeles Times — Paramount and Bonta Ordered Into Settlement Talks — Reports the October 14–15 settlement meetings and current state of the dispute.
- Los Angeles Times — Paramount’s Possible Hollywood Exit — Detailed reporting on the relocation contingency, potential destinations and implications for Los Angeles.
- Reuters — DOJ Backs Bond Demand in Paramount-Warner Fight — Covers the $1.88 billion bond dispute, $7 million daily fee and March trial.
- TheWrap — Paramount Preps California Exit — Reports the latest developments surrounding Paramount’s potential departure.
