The recent suggestion by President Trump that he might take action to “defund” California’s federal subsidies over a showdown on immigration made national headlines. But it was what he said next that raised the more important question of the financial relationship between state and nation.
“We give tremendous amounts of money to California,” Trump said in an interview with Fox News host Bill O’Reilly that aired before the Super Bowl.
What the president didn’t say: California gives a lot to the rest of America, too.
A closer look at some of the data — from government services in any given year, to taxes paid and beyond — shows how valuable the relationship is between California and the United States.
California: The world’s sixth-largest economy
A popular measurement of California’s economic heft is its gross domestic product, an often-updated snapshot of the projected dollar value for all goods and services. And as 2015 data published by the California Department of Finance makes clear, the Golden State’s GDP makes it an international powerhouse.
Lawmakers like to boast that California’s economy — now worth more than $2.4 trillion— would be the sixth-largest in the world if the state were its own nation. And there’s some speculation that the ripple effects of the “Brexit” vote in the United Kingdom may ultimately push California up one step, to No. 5.
No state’s economy comes close to the heft of California’s
The federal government’s own researchers estimate GDP for each of the 50 states, and California is clearly the top dog. While there’s a long-running rivalry with Texas, a Republican-dominated state that claims to be more business-friendly, California’s overall output is the clear winner.
The gap in GDP with other states is even more striking. And from a political viewpoint, it’s worth noting that two of the most hotly contested states in the 2016 presidential election — Florida and Pennsylvania — have combined goods and services that are less than two-thirds of what California contributes to the overall U.S. economy.
In many ways, California feeds the nation
Those outside California may think good wine tells the only important story of the state’s agriculture industry. But in sheer size, the Golden State leads the nation when it comes to the value of its crops and livestock.
Data compiled by the independent, nonpartisan Legislative Analyst’s Office shows more than $45 billion worth of farm production in 2015, far surpassing the runners-up of Iowa, Texas and Nebraska.
While grapes are important — the state’s third-most valuable commodity, according to the analyst’s data — milk and almonds are the top two, in that order. Cattle and lettuce round out the top five.
California is (very) far from the top in how much states receive from the federal government
Perhaps the most intense part of the debate over Trump’s comments has centered on how much Californians pay in taxes versus how much they receive in federal services.
The answer depends on how both sides of the ledger are viewed. In its broadest definition, “federal services” include everything from monthly Social Security checks for retirees to university grants and beyond.
A study by the Pew Charitable Trusts attempted to quantify 2014 federal spending per person. On this basis, California gets a lot less than many other states. One reason for that, say researchers: A significant portion of federal dollars is spent on retirement and healthcare subsidies for older Americans. California’s population, on the other hand, has been dominated by those younger than 65.
Californians pay more taxes, collectively, than other Americans
So what’s the best way to compare the amount of dollars spent by the federal government in California to the taxes paid by the state’s residents?
The Legislative Analyst’s Office, after sorting through various data collections, recently estimated that the federal government spends some $367.8 billion in California during an average year.
Of course, that includes those guaranteed benefits for older Americans, which are handed out whether the person lives in California or Arkansas. Those retirement benefits are more than 41% of the total federal spending in the LAO analysis.
On the other side of the ledger is what Californians pay in taxes. Averaging data compiled by the Internal Revenue Service over 2013, 2014 and 2015, the net annual contribution (after refunds) from Golden State taxpayers is about $356 billion.
That average could be on the way up: 2015’s total tax payment from California was substantially higher than in the two previous years.
These two estimates — annual federal payments and annual federal taxes paid — suggest that Californians continue to come up short on a dollar-for-dollar basis of services. In contrast, a number of other states continue to receive far more from the federal government than their residents pay in taxes.
And some of that money, it could be argued, comes from California.
Sources: Legislative Analyst’s Office, California Department of Finance, United States Department of Commerce, Pew Charitable Trusts