One reason New York isn’t as rich as it used to be: Redistribution of federal tax money to other states

September 6, 2012
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(This article was originally published at Statistical Modeling, Causal Inference, and Social Science, and syndicated at StatsBlogs.)

Uberbloggers Andrew Sullivan and Matthew Yglesias were kind enough to link to my five-year-old post with graphs from Red State Blue State on time trends of average income by state.

Here are the graphs:

stateincometrends.png

Yglesias’s take-home point:

There isn’t that much change over time in states’ economic well-being. All things considered the best predictor of how rich a state was in 2000 was simply how rich it was in 1929…. Massachusetts and Connecticut have always been rich and Arkansas and Mississippi have always been poor.

I’d like to point to a different feature of the graphs, which is that, although the rankings of the states haven’t changed much (as can be seen from the “2000 compared to 1929″ scale), the relative values of the incomes have converged quite a bit—at least, they converged from about 1930 to 1980 before hitting some level of stability. And the rankings have changed a bit. My impression (without checking the numbers) is that New York and Connecticut were historically industrial but Connecticut is now much more suburban.

I think one reason NY is not so rich is that, as a rich state, it’s been heavily taxed for about 100 years in order to pay for improvements in the rest of the country. Remember “Good Roads Everywhere”?

minimap.jpg

From 1924:

“Such a system of National Highways will be paid for out of general taxation. The 9 rich densely populated northeastern States will pay over 50 per cent of the cost. They can afford to, as they will gain the most. Over 40 per cent will be paid for by the great wealthy cities of the Nation. . . . The farming regions of the West, Mississippi Valley, Southwest and South will pay less than 10 per cent of the cost and get 90 per cent of the mileage.”



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