US states should have autonomy—like EU countries
All we need to change is taxation.
What if US states had the same autonomy as EU countries?
Theoretically, Vermont could become a social democracy just like Malta—after all, they have the same population size and GDP per capita. California has the same population as Spain and is twice as rich by GDP per capita—they could afford to subsidize childcare, healthcare, and education just like Spain. Despite being our least populous state, Wyoming is richer than Sweden or the Netherlands on a per capita basis—it could establish a sovereign wealth fund just like Norway does, investing its surplus oil revenues for the benefit of its citizens.
The only reason US states can’t provide for themselves the way EU countries do is that, in the US, the federal government collects the bulk of tax revenue, not the states.
If US states could collect taxes and manage their own budgets the way European countries do, higher-tax states like California, New York, and Massachusetts might expand social programs like universal healthcare, education, and childcare. They might invest in public transportation, tech development, and renewable energy. Lower-tax states like Texas, Florida, and Nevada might replace income taxes with sales taxes; privatize public services like charter education, healthcare, and toll roads; and invest in infrastructure projects. There would be a lot of variation between states—Hawaii might limit who can purchase property on the islands, Utah might expand refugee resettlement programs, Wyoming might increase land conservation efforts for hunting and outdoor recreation.
European countries have this same kind of variation: Germany has fewer big cities, but many medium sized ones and thus invests its dollars in interconnected public transportation infrastructure. Norway has a lot of mountains and fjords, and allocates its revenues toward conservation and national parks. Because of their low-lying geography, the Netherlands invests significantly in flood control. Spain, which has more coastline than other countries, invests significantly in fishing infrastructure.
Small regional communities are generally better at deciding what they need, and where they need to allocate their money. Why shouldn’t the states do so too?
We don’t need to talk about secession to make this a reality, just taxation. The Bill of Rights already grants states the authority to self-govern—they have their own (much longer) constitutions, operate their own legislative bodies that make laws, and manage their own budgets. The only reason states don’t have the power to invest in social services or privatize them is that they don’t have the money to do it. The 16th Amendment, ratified in 1913, gave Congress the power to tax the population federally without apportioning it to states, then they expanded that access when they needed more money during the world wars. Today, 64% of our tax revenues are collected by the federal government with only 21% collected by the state and 15% collected by local governments.
How is that federal money being spent?
It’s a common misconception that richer states subsidize poorer states and that’s why we couldn’t give tax autonomy to states. But actually all states are funding the federal government which doesn’t spend that money in the best interest of states. To start, the federal government has a lower tax rate than every European country, (26.6% of our economy vs. 34.1% in Europe) which means it earns much less income. Then, we spend nearly $2 trillion more than we earn each year which puts all of the states in debt—resulting in that $882 billion we spend on interest each year. Because we don’t have universal healthcare, we spend double what any other wealthy nation spends on healthcare per person. The combined line items for health, Medicare, and Veterans Benefits make up $2.1 trillion of our budget and 18.3% percent of our GDP—Germany is the next highest country, spending only 12.8% of it’s GDP on healthcare.
What budgets are given or raised by the states are barely enough to fund the basics. Utah, for example, is richer than Germany, Sweden, and Finland by GDP per capita—our economy was worth $209.98 billion in 2021. If Utah was taxed the way European countries are (at 34.1% of their economy, on average), our state would have earned $71.60 billion—enough to provide our citizens with universal healthcare, universal childcare, universal education, and all the rest. Even if Utah was taxed the way the US is (at 26.6% of our economy), it would have earned $55.85 billion, more than enough to accomplish a lot of the same. Instead, that $55.58 billion went to the federal government who then gave us only $5.48 billion back. Along with what we were able to raise in state taxes, Utah earned only $20.3 billion in revenue—that’s only 9.67% of our economy we get to keep and use while European countries keep 34.1% on average.
That difference means Germany can afford free college education, Utah can’t.
While it’s true that poorer states benefit more from what programs we do support at the federal level, that’s only because the US federal government exempts the poor and the rich from taxation, and only provides social services to retirees and the poor. Other countries tax everyone and extend tax benefits to all citizens. Mississippi, for instance, is the poorest US state by GDP per capita and thus taxes its residents the least (9-10% of their GDP) and receives the most welfare aid from the US federal government (in the form of social security, Medicaid, and unemployment benefits (making up 34.2% of its GDP). But Italy is even poorer, with a lower GDP per capita than Mississippi1, a lower median income2, and a higher unemployment rate3, and yet they tax their citizens much higher (42-45% of their GDP) and spend that money on a better quality of life for all citizens.
Italy has universal healthcare while many Mississippians are uninsured. Italians have better public education and free university tuition while Mississippians have low ranked public schools and can’t afford college. Italians enjoy excellent public transportation and high walkability in their cities while Mississippi residents must rely on cars. Italians get four weeks of vacation per year, five months of maternity leave at 80% pay, and 35 hour workweeks. Mississippians work 40+ hours a week, get no vacation days, and don’t have access to maternity leave unless their employers choose to provide them—which they don’t because most of the jobs are low wage jobs.
Might poorer states prefer to use their tax dollars for the best benefit of their citizens? They do! Many poorer states, like Mississippi, have voted to expand Medicare access only to be blocked by the federal government. Many, including West Virginia and Alabama, have wanted to use broadband grants to expand internet access to rural areas but federal regulations favored private companies who didn’t implement them that way. Might richer states want to use their tax dollars for the benefit of their citizens too? They do! Vermont voted for universal healthcare in their state but was blocked by the federal government. Many states, including California, Oregon, and Washington, have voted to subsidize childcare but the federal government wouldn’t give them the budget.
That the federal government has to make one budget that works for all of the states is exactly why it doesn’t work for any of them. New York does not have the same needs as Hawaii, Mississippi does not have the same needs as California. Every state wants to do different things with their tax dollars but they’re forced to compromise at the federal level. Gridlock means few get what they want. Legislators sneak funding for projects in their own districts (earmarks) into federal projects to gain favor with voters, but that makes the whole budget more expensive for all of us. Our budget becomes filled with line items individual states need, but all of them don’t.
Rich and poor states alike would be better served by a federal government that allows them to raise and allocate their own tax dollars in a way that works best for them. After all, every one of the line items in our federal budget is managed by individual countries in Europe, and I think that’s better. I think democracy works better in small groups where their vote counts and addresses their direct needs. After all, there were only 3.9 million people in the United States when we wrote the Constitution—the average size of a US state today—and yet that same Constitution now governs 331.9 million. Is it any wonder we find it complicated to agree? To define what life should look like for everyone, much less try to write a budget together?
But at the state level, everyone agrees! According to Pew Research, 66% of Americans view their local governments favorably, 54% view their state governments favorably, and only 32% view the federal government favorably. And people generally like their state governments—75% of Republicans living in Republican states view their state governments favorably and 70% of Democrats living in Democratic states view their state governments favorably.
If we’re happy with our state governments but unhappy with our federal government, why shouldn’t states be empowered to act in the best interest of their citizens?
The most common rebuttal to this idea is that people would move, and that’s true. When the Schengen Agreement opened borders between European countries in 1995, western European countries with strong economies (Germany, France, Netherlands) saw an influx of workers looking to increase their incomes, and companies moved headquarters and production facilities to countries with lower labor costs and business-friendly regulations. There were a lot of benefits to this—pay wages increased as people either moved to be closer to good jobs or companies moved closer to them, and the free movement of workers contributed to economic growth within the EU by optimizing labor allocation and enhancing productivity. There were also detriments—Eastern European nations faced brain drain as their skilled populations moved for better opportunities.
This effect also happens in the United States where free movement of people between states means people and companies can move for economic advantages. See Tesla and Oracle relocating to Texas for lower taxes and better business regulations, or workers relocating to Austin, Seattle, New York, and Miami for job opportunities. Today, both the US and Europe are reversing the effect of brain drain by offering tax incentives to remote workers and funding to entrepreneurs interested in starting local companies. Now that economic hubs have become too expensive to live and remote work has been on the rise, reverse migration is happening. Post-pandemic, many workers have left high-cost cities (like San Francisco) for lower-cost states like Texas, Florida, Colorado). European migration has similarly shifted away from expensive cities like London and Paris to cheaper regions.
Over time, movement is equalizing.
If US states could raise and manage their own taxes and remit a portion of their earnings to the US federal government, just like the EU does, states could more easily provide for their citizens in a way that works best for them, and citizens can more easily live in the states that most appeal to them. And if we continue to keep all of the things that our federal government is really good at—like having a single currency managed by a strong federal bank, federally managed economic policy and trade, and a national military—the United States could continue to provide for the greater country better than the EU currently provides for the European continent. We could enjoy the autonomy of EU countries, even as we keep the unity of the United States. It’s the best of both worlds.
Could we do it?
To allow US states to tax their own economies, we’d have to repeal or amend the 16th amendment, requiring a two-thirds vote in both chambers of Congress and ratification by three-fourths of the states. We’d also have to overhaul the Internal Revenue Code (Title 26) to oversee compliance at the state level rather than collecting revenue directly.
This is doable!
There are eight high-earning states that might be interested in earning much more of their tax revenue, including California, New York, Connecticut, Massachusetts, New Jersey, Minnesota, Colorado, and Utah. They are also among our most populous states and thus represent 26.2% of the seats in Congress. There are also many Democratic states that want to provide more social services than they currently can like Delaware, Hawaii, Illinois, Maine, Maryland, New Mexico, Oregon, Rhode Island, and Washington. That’s another 12.7% of Congress. Additionally, many Republican states have long wanted to limit federal power and give states more control over taxation including Texas, Florida, Alaska, Tennessee, South Dakota, Wyoming, New Hampshire, Idaho, Montana, Kentucky, and Missouri. They represent 22.06% of Congress.
That’s 60.96% of Congress that might be interested in managing their own taxation given the right incentives, but still not enough to meet the two-thirds threshold (66.7%).
Who might oppose it? States that rely on federal spending like New Mexico, West Virginia, Mississippi; states with large federal employment or military presence like Maryland, Virginia, Hawaii; and rural states that depend on agricultural subsidies and federal aid like North Dakota, South Dakota, Montana.
A transitional plan that meets the needs of opposing states could help. For instance: Even as we allow states to collect income tax and remit a portion to the federal government, we could also ensure that remittance is high enough to keep more popular federal programs in place, including social security and the military, agricultural investment, and our ability to pay down our federal debt. EU countries currently contribute only 0.7% to 0.8% of their gross national income to the EU, while the US federal government earns up to 20% of its GDP in tax revenue. There’s no reason we couldn’t find a middle ground that accomplishes what we need to achieve federally even as we allow states to better manage their own budgets locally.
In fact, the US could even start with where we are now. Even if states remitted up to 20% of their economies to the federal government, some states could raise their total tax burden to earn 30% or even 40% of their economies in revenue. The federal government would continue earning what it does now, but states could potentially earn much more. Over time, as states take on social security and healthcare and the deficit is lessened, the federal remittance could go down giving more financial upstate to states.
I think this idea is more popular now than ever. As Elon Musk’s DOGE takes a red pen to the federal budget, states will receive even fewer benefits than they previously did. If states need money to do anything, they’ll have three options: Keep trying to sneak more things into the federal budget (which no one wants and the federal government can’t afford), raise state taxes (which won’t be enough), or demand that states be able to tax their own economies (which are all rich enough to fund most of the things they could want to do).
Maybe if states get mad enough they’ll demand that last option. After all, Texas relies on federal aid from FEMA more than any other state, but as DOGE cut FEMA leading up to Hurricane season, who is going to help them with disaster relief? Texas is rich enough to fund relief on its own if only it had more power over taxation. Similarly, when DOGE made drastic cuts to the NIH, gutting medical research funding, 22 states as well as universities, hospitals, and research institutions sued the federal government. But these are states that are rich enough to work together and support medical research if only they had access to the full extent of their own economies.
For all we need to cut federal expenses, we also need to raise state incomes, and this might finally be the breaking point that forces states to realize: We have richer economies than most countries in the world and could afford to do everything we want to do ourselves if we just had control over our own taxation—and frankly we’d rather tax our own state economies than give it all to the federal government who is wasting it all away.
We have reached the limits of what the federal government can do, and while it might have been important to consolidate financing during the world wars, there can be no doubt the federal budget has gotten too big and too expensive to be of any help to the states today. There’s a reason populist politicians are so popular right now—from Bernie Sanders to Donald Trump: No one is happy with the American federal government and everyone wants it to be different. If we’re going to slash and burn the federal budget maybe it’s also time for states to raise and earn their own incomes.
Maybe they’ll finally demand it.
Thanks for reading,
This essay is part of CITY STATE, a collection of seven writers exploring autonomous governance through an online series and print pamphlet.
$35,000 to $40,000 in Italy vs. $40,000-$45,000 in Mississippi
€32,000 in Italy compared to $50,000 in Mississippi
7.5% in Italy, 3.5% in Mississippi
Interestingly enough, I'd argue that the EU needs to begin acting more like the Federal US while you're simultaneously arguing the US should act more like the EU... I think the best-case scenario is probably somewhere in the middle for both.
The US Federal government is taxing too much and is "too federal", meanwhile the EU really should increase its taxation and power at the federal (if you could call it that) level.
The numbers in your article are astounding:
"EU countries currently contribute only 0.7% to 0.8% of their gross national income to the EU, while US state citizens currently contribute 26.6% of their income to the federal government (on average)."
Perhaps the best path for both EU member states and US states is something like 5% ?
I really like this idea. Everyone seems to be demanding more power and authority for the states, and having them operate fiscally as their own countries and enabling them to spend their own tax dollars in the best ways to serve their individual citizens more effectively makes great sense. Each state is different and their citizens want different things. Let’s make it happen!