As tensions mount between California and the Trump administration regarding immigration, another potential dispute is arising over taxes. The conflict began with reports suggesting the Trump administration is contemplating slashing funding for California’s university system, the largest higher education system in the country, enrolling about 12% of all U.S. students. In response, Governor Gavin Newsom took to social media on Friday afternoon, highlighting that California contributes approximately $80 billion more in taxes to the federal government than it receives in return. “Maybe it’s time to consider halting that, @realDonaldTrump,” Newsom remarked.
What defines a donor state? A donor state is one that contributes more in taxes to the federal government than it receives in return. According to tax data, the largest donor state is California by a significant margin. In 2022, California provided $692 billion in tax revenue to the federal government, while receiving $609 billion in federal funding, resulting in a shortfall of about $83 billion, as reported by the California Budget and Policy Center, an impartial think tank.
California’s substantial deficit is largely attributed to its high number of affluent residents, who pay a greater portion of their income in federal taxes compared to lower-income earners, notes the California Budget and Policy Center.
A total of 11 U.S. states contribute more in taxes to the federal government than they receive back, according to the Rockefeller Institute of Government:
1. California ($83 billion deficit)
2. New Jersey ($28.9 billion)
3. Massachusetts ($27 billion)
4. Washington state ($17.8 billion)
5. New York ($7.1 billion)
6. Minnesota ($4.5 billion)
7. Colorado ($2.9 billion)
8. Illinois ($2.6 billion)
9. New Hampshire ($2.4 billion)
10. Connecticut ($1.9 billion)
11. Utah ($709 million)
Conversely, some states receive more in federal funding than they contribute in taxes. This imbalance is due to various factors, including a higher proportion of residents relying on federal aid programs like Medicaid, or a greater number of federal installations, such as military bases.
In response to Newsom’s suggestion of boycotting federal tax payments, Treasury Secretary Scott Bessent cautioned in a social media post on Sunday that the governor’s proposal amounts to a threat of engaging in criminal tax evasion. Bessent accused Newsom of planning to defraud American taxpayers and leave California residents accountable for unpaid federal taxes. He recommended that instead of resorting to criminal means, Governor Newsom should explore a tax strategy for California akin to the Trump Tax Cuts model, aiming to reduce the state tax burden and enable families to retain more of their earnings.
