Robin Einhorn on tax redistribution to the South in the United States, “Look Away Dixieland: The South And The Federal Income Tax” in Northwestern University Law Review, 2014.
Some facts (and Einhorn has great maps in the paper):
Armed with the power to collect this lucrative tax by the ratification of the Sixteenth Amendment in 1913, the federal government has raised its revenues disproportionately in the North and distributed its spending disproportionately in the South. Strikingly, the tax side of this history has gone all but unremarked in the literature. The outline of the spending story is much more familiar: the huge role that federal spending played in promoting the transformation of the South “from cotton belt to sunbelt,” starting slowly in the 1930s (with, for example, rural electrification), accelerating rapidly during World War II (military bases, weapons contracts), and then ratcheting upward again after 1970. The Social Security and Medicare benefits of migrating retirees have enhanced the pattern more recently, along with disproportionate spending on poverty programs in the South.
How much was the redistribution worth?
In 1916, the first year of published income tax statistics, New York State paid a stunning 45% of the proceeds of the personal income tax. Pennsylvania came in second, paying 10%, and Illinois third at 6%. This result was the point of the Sixteenth Amendment: by exempting income taxation from the apportionment rule that the Constitution specifies for “direct taxes,” the Amendment allowed Congress to levy its taxes in proportion to the distribution of income rather than the distribution of population. More specifically, in regard to New York, the amendment allowed Congress to pull 45% of the income tax from a state with only 11% of the population.
And also expected income tax to replace the “punitive” tariffs that favored the North.
Today, it can seem a paradox, at best, that the federal government redistributes from the states where majorities are tolerant of federal taxation toward the states where they are unremittingly hostile. A century ago, however, the rhetoric was more straightforward. Southern politicians demanded the adoption of the federal income tax because they knew that it would benefit their constituents.
Why did the South, so opposed to Federal “intervention” rush to support the income tax? Because they correctly surmised that “intervention” was over.
But they [southern politicians] did know one thing: that they were living in the Progressive Era. Hayne had not wanted Webster’s railroad in 1830 because it would allow Massachusetts to interfere with slavery in South Carolina. The Progressive Era was different, promising subsidy without interference. Of course Southerners seized this new opportunity.