AP Publishes Misleading Analysis of Census Data on Federal Taxing and Spending

October 15, 2007

How much federal spending comes back to each state, compared to the federal taxes paid by residents of each state? That’s the question answered each year by the Tax Foundation and the Census Bureau. Census provides the spending breakdown, and the Tax Foundation tallies the taxes and calculates the ratios.

Census published the spending data for federal fiscal year 2005 earlier this week in its Consolidated Federal Funds Report (CFFR).

See the Tax Foundation’s news release here.

Unfortunately, an Associated Press reporter who claims to have gotten the Census data early has published his own amateurish and inaccurate ratios of spending to taxes.

Delaware readers must have been shocked to see themselves ranked as getting the least back in federal spending per dollar of tax. But it’s no wonder: the AP counted all the tax payments of corporations headquartered in Delaware as coming from Delaware’s taxpayers.

It’s not that simple. You can’t just look at the return address on the envelope that arrives at the IRS. The taxes these companies remit are not paid only by residents in Delaware, but by customers, shareholders and employees across the country.

To learn more about how the Tax Foundation computes “economic incidence”–that is, how to figure out which state’s taxpayers bear how much of each tax–see here.

It is also unclear if the AP counted all taxes that should rightfully be counted since there is no complete ranking or discussion of the author’s technique. The Tax Foundation fully accounts for all federal taxes.

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