Question from Dustin: How can Texas transition from being a donor state to receiving more federal funds, and what are the implications of such a shift?
This question gets to the heart of Texas’s fiscal relationship with Washington – and why that relationship is fundamentally broken.
Texas currently overpays into the federal system by $68.1 billion annually, according to 2024 USAFacts data. That makes Texas the third-largest donor state behind California and New York. Texas residents and businesses send roughly $416 billion to Washington each year but receive only $348 billion back in federal spending.
The question is: Could Texas flip this equation to become a recipient state instead?
The Short Answer: Yes, but you wouldn’t want to live there.
States become net recipients of federal funds through two main pathways. First, they can dramatically increase their participation in federal social programs like Medicaid, SNAP, and unemployment benefits. Second, they can lobby Congress to change federal funding formulas that determine how money gets distributed.
The first path would require Texas to adopt policies similar to high-dependency states. New Mexico receives $15,448 more per resident than it sends to Washington, largely because 25% of its workforce consists of federal employees and it has high enrollment in federal assistance programs.
To match this, Texas would need to expand Medicaid to cover more residents, increase SNAP participation, and create more federal jobs. The state would also need to raise taxes dramatically to qualify for more federal matching funds – since most federal programs require states to contribute 40-60% of program costs.
The second path involves political influence. Research shows that states like California and New York have successfully lobbied to maintain favorable federal funding formulas even as their populations decline relative to other states.
Why This Strategy Fails Texas
Both approaches require Texas to abandon the principles that make it economically successful. Texas thrives because of low taxes, limited government, and economic freedom. Becoming a recipient state would mean higher taxes, bigger government, and more federal control.
Consider what happened during COVID-19. Before the pandemic, eight states were donor states. After massive federal spending, temporarily there were none. But this “improvement” came at the cost of $6 trillion in federal debt that future generations must repay.
More importantly, federal money never comes free. Every dollar includes federal mandates, regulations, and restrictions. Federal grant programs require states to implement programs according to federal guidelines, often the most inefficient methods possible.
The Independence Alternative
Daniel Miller, president of the Texas Nationalist Movement, frames this differently. He uses a medical analogy: the federal government “draws all the blood out of your body, spills about 40% of it on the floor, and takes the rest and puts it in your arm and says lucky you, you wouldn’t be alive without me.”
The $68.1 billion that Texas overpays annually represents resources that could fund Texas priorities directly. Instead of sending money to Washington, taking a 40-60% administrative “haircut,” and receiving it back with strings attached, an independent Texas would keep those resources in-state.
This isn’t theoretical. Rockefeller Institute data shows that donor states consistently subsidize failing programs in recipient states while struggling to fund their own priorities. Texas taxpayers fund schools in other states while Texas schools face budget constraints.
The Bottom Line
Texas could become a recipient state by adopting the failed policies of high-dependency states. But this would require abandoning economic freedom, raising taxes dramatically, and accepting federal control over state programs.
The better path is independence. Instead of playing Washington’s rigged game – where Texas sends billions north only to beg for scraps back – TEXIT would allow Texas to keep its resources and spend them on Texas priorities, designed by Texans for Texans.
The question isn’t whether Texas can flip its federal funding status. The question is why Texas continues participating in a system designed to drain its resources while limiting its sovereignty.
Independence solves the donor state problem permanently by ending the abusive relationship altogether.
