Posted by: Richie Bernardo

Americans value independence. We fought hard for it during the American Revolutionary War. Today, however, we celebrate not only our freedom from the British crown but also our strong ability to rely upon ourselves as individuals. It’s a virtue we bring up in our children, employees and organizations.

But what does it mean for whole populations to be “independent” in the modern sense of the word?

In this report, WalletHub’s data team addressed that question by comparing the 50 states based on five sources of dependency: consumer finances, the government, the job market, international trade and personal vices. We broke down these categories into 39 key indicators of independence in order to determine which states are most self-sustaining. Read on for our findings, methodology and expert advice on overcoming our reliance on others.

To get a sense of just how free Americans are feeling financially, check out WalletHub’s nationally representative Fourth of July Credit Card Survey.

1. Main Findings
2. Ask the Experts
3. Methodology

Main Findings

Embed on your website<iframe src="//d2e70e9yced57e.cloudfront.net/wallethub/embed/36426/geochart-independent.html" width="556" height="347" frameBorder="0" scrolling="no"></iframe> <div style="width:556px;font-size:12px;color:#888;">Source: <a href="https://ift.tt/2K5429w>  

Most Independent States

Overall Rank (1 = Most Independent)	State	Total Score	‘Financial Dependency’ Rank	‘Government Dependency’ Rank	‘Job-Market Dependency’ Rank	‘International-Trade Dependency’ Rank	‘Vice Dependency’ Rank
1	Colorado	65.43	13	3	3	5	39
2	Utah	65.26	23	4	1	14	9
3	Minnesota	62.47	2	9	8	19	37
4	Nebraska	61.94	9	5	4	27	19
5	Virginia	61.30	19	10	18	10	16
6	Hawaii	61.26	10	14	17	9	25
7	South Dakota	60.83	21	29	6	8	12
8	Massachusetts	60.81	7	8	20	28	7
9	Wisconsin	60.52	12	17	5	15	31
10	Kansas	59.94	17	1	26	25	32
11	Idaho	59.83	34	31	2	7	20
12	New Hampshire	58.61	1	16	19	36	17
13	North Dakota	57.99	8	19	14	37	6
14	Montana	57.77	15	39	25	1	34
15	Oklahoma	57.65	41	33	34	3	11
16	Iowa	57.39	11	20	12	29	22
17	California	57.07	31	12	35	22	8
18	Florida	56.64	39	21	29	12	13
19	Wyoming	56.16	6	36	48	4	14
20	Delaware	55.78	32	2	36	39	28
21	New York	55.52	24	30	39	23	1
22	Rhode Island	55.44	26	24	38	16	10
23	Connecticut	55.17	14	15	43	34	5
24	Pennsylvania	55.16	5	28	41	20	21
25	New Jersey	54.87	22	7	47	38	4
26	North Carolina	54.75	30	11	27	33	29
27	Vermont	53.84	3	40	16	24	26
28	Maryland	53.78	44	38	28	6	23
29	Arizona	53.21	42	41	22	17	3
30	Missouri	52.65	28	32	30	11	47
31	Arkansas	52.53	47	27	10	13	46
32	Illinois	52.21	29	6	45	40	30
33	Nevada	51.64	49	13	37	18	42
34	Ohio	51.50	33	26	31	35	33
35	Washington	51.30	4	23	13	47	27
36	Maine	50.74	20	42	9	21	45
37	Georgia	50.34	46	22	23	32	35
38	Oregon	49.67	16	45	11	26	48
39	Texas	49.41	27	18	21	48	18
40	Michigan	48.74	18	25	32	44	24
41	New Mexico	48.36	50	48	50	2	2
42	Tennessee	48.25	37	37	7	42	36
43	Indiana	45.72	38	34	15	45	43
44	West Virginia	44.21	25	47	46	30	41
45	Louisiana	42.76	40	35	44	43	38
46	Alabama	41.80	45	44	40	41	40
47	South Carolina	40.35	36	43	33	50	15
48	Mississippi	39.58	48	49	42	31	50
49	Kentucky	36.96	43	46	24	49	44
50	Alaska	34.84	35	50	49	46	49

 

Ask the Experts

Reliance on others can be challenging to overcome. For the best ways to achieve greater independence in several of the dependency categories we examined in this report, we asked a panel of experts to share their thoughts on the following key questions:

1. Is it fair that some states are more dependent than others on the federal government?
2. What tips do you have for a person who wishes to increase his or her financial independence? What are some first steps?
3. What tips do you have for a person who wishes to reduce his or her job dependency? Should they try to join the “gig” economy?
4. Should presidential campaigns be publicly funded in order to help ensure the president is as independent as possible from special interests?
5. Should states try to make their economies more or less dependent on international trade? How?

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• Reginald Shareef Professor of Public Administration/Policy at Radford University and Virginia Tech's Center for Public Administration & Policy
• Ciara Torres-Spelliscy Professor of Law, Stetson University College of Law, Brennan Center Fellow
• David Canon Leon Epstein Faculty Fellow, Department of Political Science, University of Wisconsin
• Herb Asher Professor Emeritus, Political Science, Ohio State University
• William K. Tabb Professor Emeritus, Graduate Center City University of New York
• Rita Kirk Cary M Maguire Endowed Director, Maguire Center for Ethics & Public Responsibility, Professor of Corporate Communication & Public Affairs, Southern Methodist University

Reginald Shareef Professor of Public Administration/Policy at Radford University and Virginia Tech's Center for Public Administration & Policy

Is it fair that some states are more dependent on the Federal Government than others?

The United States is a very large and diverse country. As such, various states/regions possess vastly different levels of social and human capital. For example, two years ago General Electric moved its corporate headquarters from the suburbs of Fairfield, CT (a very affluent state) to Boston because the company is transforming itself from a manufacturing company to a technology enterprise and Boston is where technology students and professors are located: “We want to be at the center of an ecosystem that shares our aspirations”, GE’s chairman said at the time. “Greater Boston is the home to 55 colleges and universities and spends more on research & development than any other region in the world. Boston attracts a diverse, technologically-fluent workforce focused on solving challenges for the world.” Basic economics suggests that Boston (and the Commonwealth of MA) would contribute more in federal tax dollars than a state (e.g., Mississippi) with less available social and human capital.

Indeed, the Commonwealth of MA sends more money to the federal treasury ($92 billion) than it gets back in federal spending ($76 billion) and hence is considered a “donor” state. This is simply how a progressive tax system works at the macro level. At the micro level, most Americans expect the wealthier to pay more in federal taxes than less wealthy Americans.

Consequently, I don’t see anything inherently unfair about a progressive tax system or the corollary that some states are more dependent on the federal government than others.

However, what I do think is unfair/unethical are tax changes that intentionally reduce benefits to residents in wealthy “donor” states like California via changes in public policy and thereby make them “super donor” states. The recent GOP-tax overhaul put a cap on deductions for state and local taxes (SALT) of $10,000. Previously, these deductions were unlimited. This change in tax policy is expected to hit six states where SALT deductions are highest as a percentage of income: New York, New Jersey, Connecticut, California, Maryland, and Oregon.

SALT helps reduce taxes in the higher donor states tax by reducing the amount of money residents send to Washington. California is a good example. The state sends $410 billion to Washington and gets back $393 in federal spending for a $17 billion negative balance. However, SALT deductions allowed Californians to collectively reduce their taxable income by $101 billion in 2014.

However, under the new tax law, the cap on SALT deductions would lead to 26% of California property owners sending an average of $3,200 more to Washington each year. Thus, the “super donor” honorific!

GOP House and Senate leaders pushed for a SALT cap because it is estimated the deduction deprives the Treasury Department of $111 billion per year and over $1.5 billion over the next decade. However, the SALT cap would help offset the cuts in individual and corporate tax rates. Tax cuts, that is, that are supposed to stimulate economic activity and essentially pay for themselves.

The late MIT economist Lester Thurow’s book - - The Zero-Sum Society - - argues that we live in an advanced capitalistic state where everybody wants public policy protection (i.e., wants to win the economic lottery) and losses can no longer be allocated to minorities and other marginalized groups. Conservative political and economic orthodoxy contends that supply-side economics - - where tax rates are cut for the wealthy and corporations- - are a catalyst for economic growth. Yet, most empirical research refutes that contention.

So, we are at the point in 21st Century American capitalism where conservatives are willing to cut taxes for the wealthy and corporations (an economic win for these stakeholders) and replenish these lost funds by creating super donor states like California via SALT ( an economic loss for residents in wealthy, primarily blue states). This is the epitome of Thurow’s zero-sum economic game and its partisan, unethical, and represents a threat to the legitimacy of the public policymaking process.

Ciara Torres-Spelliscy Professor of Law, Stetson University College of Law, Brennan Center Fellow

Is it fair that some states are more dependent on the Federal Government than others?

One measure of the difference in state’s dependence on the federal government can be found in the 2012 Supreme Court case NFIB v. Sebelius challenging the Patient Protection and Affordable Care Act (better known as Obamacare). The Chief Justice John Roberts, writing for the Supreme Court noted that federally funded Medicaid has become a huge percentage of certain states’ budgets: “Medicaid spending accounts for over 20 percent of the average State’s total budget, …. See Nat. Assn. of State Budget Officers, Fiscal Year 2010 State Expenditure Report, p. 11, Table 5 (2011)[.]”

The source that the Supreme Court relied on The National Associate of State Budget Officers’ Reports are still being issued. The latest one, Fiscal Year 2016 State Expenditure Report shows that states have a wide range of economic dependence on federal funds.

Should presidential campaigns be publicly funded in order to help ensure the President is as independent as possible from special interests?

One of the post-Watergate reforms adopted by Congress in the Federal Election Campaign Act of 1974 included public financing for presidential candidates. This program is still on the books. And many U.S. Presidents used public financing as candidates including President Carter, President Reagan, President George H.W. Bush, and President Clinton. But over time, major party nominees have decided not to use public financing. The last major party nominee to use public financing was John McCain in 2008. Other candidates who did not win the nomination have used the program like Martin O’Malley in 2016. The reason most strong candidates opt out of public financing is the amount of money in the fund has not kept pace with the high cost of presidential races. This program could be revamped to give publicly financed candidates a competitive chance against privately funded candidates. The original reason for having public financing remains sound: we should have candidates that do not spend their days obsessed with raising campaign funds from the wealthiest Americans.

David Canon Leon Epstein Faculty Fellow, Department of Political Science, University of Wisconsin

Is it fair that some states are more dependent on the Federal Government than others?

Answering this question depends on one’s views of the fairness of the underlying laws that create inequalities between states. For example, if you think that Social Security is a good program, you will not be bothered by the fact that a state with a higher proportion of seniors will be more dependent on the federal government than a state with a smaller proportion of seniors, all else equal. If you believe in a strong military, you would support the idea that states with a larger number of military bases and defense contractors would be more dependent on the federal government than states with smaller numbers of those. You get the point. The relevant question is not inequalities among the states in terms of their share of federal funding and their dependence on that funding. The relevant question must concern the underlying policies.

Should presidential campaigns be publicly funded in order to help ensure the President is as independent as possible from special interests?

Yes! However, this step alone is not sufficient to stem the flow of special interest money in national elections. Broader laws concerning dark money, disclosure, and potentially independent spending (but the latter would require an amendment to the Constitution, so that is extremely unlikely) are all needed.

Should states try and make their economies more or less dependent on international trade? How?

Until 18 months ago, there was a strong bipartisan consensus that free trade was good for America. We are seeing that conventional wisdom challenged now. I think the uncertainly created by a potential trade war could have an impact on how states and businesses answer your question. In normal times, successful businesses are always trying to expand markets, both domestic and international. But why would a business try to expand their international reach if they could be facing a trade war? That uncertainty will create slower growth and eventually higher prices as higher tariffs are passed along to consumers.

Herb Asher Professor Emeritus, Political Science, Ohio State University

Is it fair that some states are more dependent on the Federal Government than others?

It's not a question of fairness about how dependent states are on the federal government. There is an irony in American politics. The states that send fewer tax dollars to Washington (measured in a variety of ways such as per capita, share of personal income) tend to get back more dollars from the federal government. Yet these "winning states" (such as Mississippi) tend to be the most hostile to the national government and its activities.

Should presidential campaigns be publicly funded in order to help ensure the President is as independent as possible from special interests?

I assume you mean by this full public financing with no private, individual, business, corporate contributions. This will not happen; it will certainly not be legislated by the Congress for whole variety of reasons. And a constitutional amendment is too difficult to accomplish for many of the same reasons.

William K. Tabb Professor Emeritus, Graduate Center City University of New York

Is it fair that some states are more dependent on the Federal Government than others?

Personally, I think we should try and be the UNITED States of America and that means more revenue sharing is a good thing. Helping poorer states by deciding what services every American is entitled to and helping states fund them seems reasonable. In terms of fostering democracy so that the 1% are less able to buy the government, public financing also seems a positive step.

Should states try and make their economies more or less dependent on international trade? How?

Trade, like any other market exchange between willing buyers and sellers makes both better off so that is a good thing. The problem is when the rules are not fair to both and when they unexpectedly change and businesses have sunk costs that lead to unexpected losses. The problem for the U.S. is not trade, but that Americans save too little and borrow too much from abroad and that the corporate rich both avoid taxes they should legally pay in this country and the law allows them to sidestep obligations through such gambits as moving intellectual property off shore and booking profits through tax havens. If this stopped no one would worry about trade.

People take crappy jobs because they can’t find better ones, gig or otherwise. Raising the minimum wage would make a very big difference and within reason economists do not see it causing job loss, or those who do see the job loss as minor compared to the higher income the great majority of low wage workers who would keep their jobs would receive. You know the statistics of the extent of economic insecurity and Americans living paycheck to paycheck. Cutting taxes for working people and not the “job creators” who put the money into asset speculation would be a start. Companies have the capital to invest if they think it is profitable to do so. Unless they are currying favor with the president they do not pretend they will create jobs because they have even more excess funds. they will simply buy back more of their own stock.

Rita Kirk Cary M Maguire Endowed Director, Maguire Center for Ethics & Public Responsibility, Professor of Corporate Communication & Public Affairs, Southern Methodist University

Is it fair that some states are more dependent on the Federal Government than others?

“Fair” is not a term that applies easily to discussions on the proper role of government. Most people might agree that when a natural disaster occurs, such as the volcanic eruptions happening now in Hawaii or the various hurricanes that destroy coastal areas, the collective resources of the Federal Government provide much needed relief. Monies are certainly not equally distributed, yet when such distributions follow the rules previously established, they would be deemed fair.

There are numerous contested issues related to state dependency on the Federal Government that could be challenged based on what is fair. Fairness might best be judged by answering three questions: Are the requests for special relief by the states to the federal government merited? Are the federal decisions rendered impartially? Will the grants for relief result in the likelihood that the conditions will change for the better (meaning that the investment was worth the expenditure)?

What tips do you have for a person that wishes to increase his/her financial independence? What are some first steps?

Sometimes the simple answer is the best answer: earn more than you spend. Clearly, that cannot always happen. But for many of us, we accumulate debt not out of need but from our impatience. We may need transportation but would be better off with a car we can pay for outright than to take a loan on a more expensive one. Learning to be patient and saving toward some desired purchase makes us more aware of how hard we must work to attain them. It challenges our values. Sometimes we will decide it’s not worth the extra effort and our funds are better used elsewhere.

Paying yourself out of debt is a marvelous feeling. Some people get trapped into thinking they will never be free from debt so they keep accumulating things until they run out of money and often out of hope. Want less. Make your goal to be as close to debt free as you can and only take on debt out of need rather than desire.

Give yourself the opportunity to do what you need to do to make a better life for yourself. That means developing a savings plan. It gives you freedom to make choices that you may not have otherwise. For example, people who do not have six months or so of income saved will be unable to quit a job when employment conditions dictate that you should. Financial backing means that you will never have to work for an abusive boss, fear retaliation for doing the right thing, or live in fear of being fired. Just recognize you have to do some work to earn that freedom.

Perhaps as important as anything else is to keep advancing your knowledge and your skillset. The careers of the future may come from inventions not yet known. With the rapid advance of technology, there is a premium for those who keep sharp and up to date. That often means investing in yourself and your continued education.

What tips do you have for a person that wishes to reduce his/her job dependency? Should they try to join the “gig” economy?

Make your employer dependent on you rather than the other way around. You can do that by demonstrating your value. One of my colleagues developed her skills in graphic design. She became so proficient that her employer started using her to do the work they had been hiring outside specialists to perform. When it came time for a promotion she got a sizable salary adjustment because she effectively argued that she had saved the organization twice the amount of her proposed raise by keeping the work in house. Further, without being disloyal or unappreciative of the opportunities her employer provided, she made it clear that she was willing to take another job if the company didn’t value her work.

I have long argued that you are only as good as the best you’ve ever seen. Find out who does what you think you want to do and study that position. What qualifications are required that you don’t possess? Look on job sites for your aspirational position and then construct a plan to earn your way to it. There are no shortcuts.

Finally, do what you love and the money will follow. Too many people make themselves ill by doing jobs they hate just to make money. One of the phrases I love is this: “Be more careful with your time than a miser is with gold. The point is that we only get this one life. Trading time for money is never a good bargain.”

Should presidential campaigns be publicly funded in order to help ensure the President is as independent as possible from special interests?

We have had publicly funded campaigns for years but it has gotten to the point that candidates would rather be free from the restrictions on how that money is spent.

Methodology

In order to determine the most independent states, WalletHub compared the 50 states across five key dimensions: 1) Financial Dependency, 2) Government Dependency, 3) Job-Market Dependency, 4) International-Trade Dependency and 5) Vice Dependency.

We evaluated those dimensions using 39 relevant metrics, which are listed below with their corresponding weights. Each metric was graded on a 100-point scale, with a score of 100 representing the highest level of independence.

We then determined each state’s weighted average across all metrics to calculate its overall score and used the resulting scores to rank-order our sample.

Financial Dependency – Total Points: 20

• Median Credit Score: Full Weight (~1.18 Points)
• Average Savings-Account Balance: Full Weight (~1.18 Points)
• Share of Households with Rainy-Day & Emergency Funds: Full Weight (~1.18 Points)Note: This metric is based on the Federal Deposit Insurance Corporation’s economic inclusion survey and measures to the percentage of households who saved for unexpected expenses or emergencies in the past 12 months.
• Share of Adults Saving for Children’s College Education: Double Weight (~2.35 Points)Note: “Adults” include individuals with financially dependent children.
• Employer-Based Retirement Access & Participation: Full Weight (~1.18 Points)
• Median Debt per Income: Double Weight (~2.35 Points)
• Median Household Income (Adjusted by Cost of Living Index): Full Weight (~1.18 Points)
• Poverty Rate: Full Weight (~1.18 Points)
• Age Dependency Ratio: Full Weight (~1.18 Points)Notes: Age dependency ratio is the ratio of dependents-people younger than 15 or older than 64-to the working-age population-those ages 15-64.
• Share of Low-Income Households where No Adults Work: Full Weight (~1.18 Points)
• Share of “Underwater” Mortgages: Double Weight (~2.35 Points)Note: This metric measures the percentage of homes with mortgages that have negative equity.
• Homeownership Rate: Full Weight (~1.18 Points)
• Foreclosure Rate: Full Weight (~1.18 Points)
• Bankruptcy Rate: Full Weight (~1.18 Points)

Government Dependency – Total Points: 20

• Federal Dependence: Quadruple Weight (~10.00 Points)Note: This metric is based on WalletHub’s “Most & Least Federally Dependent States” ranking.
• Share of Household Receiving Public Assistance & SNAP/Food Stamps: Full Weight (~2.50 Points)Note: “SNAP” refers to the national Supplemental Nutrition Assistance Program.
• Share of Occupied Subsidized Housing Units: Full Weight (~2.50 Points)
• Share of Federal, State & Local-Government Employees: Full Weight (~2.50 Points)
• Tax Freedom Day: Full Weight (~2.50 Points)Note: “Tax Freedom Day” refers to the day when the state’s taxpayers have collectively earned enough money to pay their federal, state and local tax bills for the year. This metric measures the number of days since the beginning of the year that the event takes place (sooner indicates greater independence).

Job-Market Dependency – Total Points: 20

• Industry Variety: Full Weight (~3.33 Points)
• Job Growth Rate: Full Weight (~3.33 Points)
• Unemployment Rate: Full Weight (~3.33 Points)
• Long-Term Unemployment Rate: Full Weight (~3.33 Points)Note: This metric measures percentage of the unemployed who had been jobless for 27 weeks or longer.
• Underemployment Rate: Full Weight (~3.33 Points)
• Job Creation Index: Full Weight (~3.33 Points)Note: This metric is based on Gallup’s “Job Creation Index” and measures the percentage of workers who reported that their employer is increasing its workforce minus the percentage reporting the opposite.

International-Trade Dependency – Total Points: 20

• Share of Jobs Supported by Exported Goods: Full Weight (~6.67 Points)
• Share of Private-Industry Employment at Foreign-Owned Firms: Full Weight (~6.67 Points)
• Share of State GDP Generated by Exports to Other Countries: Full Weight (~6.67 Points)

Vice Dependency – Total Points: 20

• Share of Adult Drug Users: Full Weight (~1.67 Points)Note: “Drug Users” refer to individuals who reported using illicit drugs in the past month.
• Retail Opioid Prescriptions Dispensed per 100 Persons: Full Weight (~1.67 Points)
• Share of Adult Binge Drinkers: Full Weight (~1.67 Points)
• Share of Adult Daily Smokers: Double Weight (~3.33 Points)
• Share of Adults with Gambling Disorders: Full Weight (~1.67 Points)
• Share of Population Spending More than They Earn: Full Weight (~1.67 Points)
• Share of Social-Network Users: Full Weight (~1.67 Points)Note: “Users” refer to the population aged 15 and older.
• Share of Online-Video Watchers: Full Weight (~1.67 Points)Note: “Watchers” refer to the population aged 15 and older.
• Share of Smart-Device Users: Full Weight (~1.67 Points)Note: “Users” refer to the population aged 3 and older.
• Median Daily Time Spent Watching TV: Full Weight (~1.67 Points)
• Average Time Spent on Adult Entertainment Sites: Full Weight (~1.67 Points)

 

Sources: Data used to create this ranking were collected from U.S. Census Bureau, Bureau of Labor Statistics, Pitney Bowes, Federal Deposit Insurance Corporation, FINRA Investor Education Foundation, The Pew Charitable Trusts, Council for Community and Economic Research, Zillow.com, Tax Foundation, United Health Foundation, Gallup, International Trade Administration, U.S. Bureau of Economic Analysis, Substance Abuse and Mental Health Services Administration, Centers for Disease Control and Prevention, National Council on Problem Gambling, National Telecommunications and Information Administration, Minnesota Population Center, University of Minnesota, TransUnion, Renwood RealtyTrac, Administrative Office of the U.S. Courts, U.S. Department of Housing and Urban Development and WalletHub research.

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