Inverted Federalism: How Washington bribes and shackles your state with your own tax dollars

Conservatives and libertarians complain about the perversion of American federalism over the last 75-100 years. Everything has become a national issue, and federal tax dollars support even the smallest local projects, either directly through grants or indirectly by subsidizing some projects, which frees up local funds for others. Since the source is far removed from the recipient, often this funding is wasteful, not really needed, or dubiously requested. We don’t usually get to see this problem up close, but I did today.

This morning my wife and I brought my eldest child to school for the first time for testing and registration. There were a stack of forms to fill out about the handbook, riding the bus, behavior, school lunches, and residency. The last two were the focus of the registrant’s particular attention. We explained to her that while we are selling our house and planning to build a new one we are living with relatives temporarily. “Oh!”, she said. In that case, we should apply for a federal homeless student program “because it will bring in more federal money.”


We’re not actually homeless, though. Not even close. We live in a very nice home while its owners are out of town on business most of the time and until we build our own. But when confronted with this situation, a public school official’s first instinct was to turn it into a hardship case to take advantage of federal largesse.

She also quite literally begged that we apply for free or reduced lunches for our child, and not just because of the exaggerated hardship she invented for us. She said they were shooting for and had so far achieved 100% compliance applying for this other federal program. It’s just a simple form, you see. They even provided a convenient sample form with Post-It noted instructions on the tricky parts if we needed help.

Of course not every student who applied for free or reduced lunches subsidized by the federal government would receive them. There are income eligibility guidelines that parents have to meet for the school to receive reimbursement for that child. But apparently there is also some taxpayer-funded incentive to get as many applications as possible, regardless of need, or at least this school official thinks so.

Needless to say, I didn’t apply for either program and was appalled at the suggestion that I do so. But I shouldn’t have been surprised.

Local schools and state budgets now exist solely at the whim of the federal government’s appropriators. States receive compensation for between 20 and 45% of their entire annual budget in federal aid. North Dakota receives the least (20.5%), and Mississippi receives the most (45.3%).

Fiscally, no state could exist without the federal government. Not even Texas, despite being solely responsible for the post-2009 economic recovery, still receives 34.5% of its state budget in federal aid for programs like the ones I was hustled for today.

This is a total inversion of what the framers intended our federalist system to be. The states were supposed to support the federal government. States did most of the work and raised taxes as necessary to fund it. That’s why there was no federal income tax until 1916; it just wasn’t needed. Since the progressive-spawned 16th (and 17th) Amendment, federal taxes and the programs they’re used to fund have exploded, leaving states to pick up the scraps along the margins.

If we really want to reduce the size and scope of the federal government, we have to eliminate its primary source of funding, the income tax. That would in turn allow states to set more reasonable rates and take care of their own citizens as the central government and its quid pro quo “incentive” bribery scheme whithers on the vine.

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