How important is the American federal stimulus to the states?


When elected officials talk about policies and programs, and when journalists write about them, a lot of big numbers tend to get thrown away, sometimes with little context to help people understand them. This could be especially true during the pandemic, when almost everything looks bigger – and sometimes worse – than usual.

Cleveland Fed researchers have a certain context on the American rescue plan, the federal stimulus plan adopted in March of this year. Some $ 350 billion has gone to state and local governments, but as the researchers wrote, “When we hear that a county gets $ 500 million and a state gets $ 5 billion, the double digits seem very high, but what we don’t know is what change these allowances can create.

For context, they divided each state’s stimulus allowance by its estimated tax revenue for 2020. This measure shows that states receive almost a full year of tax revenue, in the case of Alaska, to 10%, for Minnesota.

The median amount that states will receive is about 20% of their annual tax revenue, and the vast majority of states receive between 10 and 30%. Besides Alaska, Wyoming and South Dakota also stand out.

See: U.S. State Tax Revenue Ends 2021 Higher Than 2019, Report Says

Allowances are tied to state unemployment rates, but states also receive a fixed amount of $ 500 million, regardless of population, budget size, or anything else. It is a boon for less populated states.

Federal dollars range from amounts that “could make up for some collections lost during lockdowns,” the Cleveland Fed researchers write, to amounts “that could create a unique opportunity to invest more than a full year of tax revenue without incur new debts.

Read more : Federal stimulus is a “lifeline” for communities hit by the corona crisis, as the scars of 2008 persist

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