A report reveals that Mass. has the #1 GDP in the United States. Here’s what that means.


The report also found that Massachusetts is among the states least dependent on federal dollars.

A new report has revealed that Massachusetts has the highest GDP per capita in the country. Daniel Borman/Wikimedia Commons

A new report has found that Massachusetts not only has the highest GDP per capita in the nation, but is among the states least dependent on federal dollars.

This is both good and bad news for Bay Staters.

Why Massachusetts has the highest GDP

Analysts from WalletHub, a personal finance website, found that Massachusetts has the highest GDP (gross domestic product) per capita in the United States.

Justin Svec, an associate professor of economics at College of the Holy Cross, said GDP per capita basically translates to average income, which means the Bay State has the highest average income in the country.

That might surprise some, given the number of Fortune 500 companies based in states like New York, California and Washington, but Svec said it makes sense for Massachusetts to come out on top.

Like New York, California and Washington, Massachusetts is home to many industries that provide well-paying jobs, such as biotech, healthcare and finance, Svec said.

Additionally, he said, the citizens of the four states are, on average, highly educated and the state itself is quite urban. Both of these things are generally correlated with higher income.

The difference is what Massachusetts lacks — a large population of low-income residents to compensate for high-income residents, Svec said. Essentially, Massachusetts has less income inequality than other high-income states.

What having the highest GDP means for Massachusetts

All of this is good news for Massachusetts. Svec said high incomes are generally correlated with high rankings on other measures of quality of life, such as economic opportunity and health outcomes.

“The fact that we have a high average income here in Massachusetts means that there are many other good statistics here in Massachusetts as well,” he said.

But, when considering the quality of life in a state, you also have to consider the cost of living, said Boston College economist Brian Bethune.

“Incomes in Massachusetts are indeed high, but the cost of living in Massachusetts is also very high,” he said. “…So really, it’s not clear if you’re really better off than someone in Maine or South Carolina where the incomes are lower but the costs are also lower.”

Why Massachusetts Is Federally Independent

Federal economic dependency basically translates to the amount of money a state contributes in federal tax dollars versus the amount of money a state receives from the federal government.

A state that is heavily taxed but receives fewer federal dollars is less economically dependent, while a state that pays little tax but receives a lot of federal money is more economically dependent.

Having a high average income in Massachusetts also means that our residents are taxed at higher rates on average than in other states, as federal income tax rates increase at higher levels of wealth.

Additionally, federal benefits such as welfare and Medicaid programs are income-tested, so a smaller portion of Massachusetts residents receive these benefits than in other states.

Bethune also noted that since Massachusetts is a densely populated state, industries such as agriculture, which rely heavily on federal grants and subsidies, do not represent as large a portion of the state’s economy as in other states. other states.

Since state benefit programs and federal grants make up a large portion of federal spending, and Massachusetts residents are heavily taxed, it makes sense that Massachusetts is one of the states least dependent on federal dollars, being ranking 44th in the country, according to WalletHub.

Is it bad for Massachusetts residents?

At first glance, this may seem bad for the Bay Staters, since they contribute more to federal taxes than other states and receive less money from the federal government than other states.

But because it’s all based on individual income, your situation would be largely the same in any state, Svec said.

“If you make $100,000 here in Massachusetts and move to another state, if you still make the same amount, you’re going to pay the same amount in federal taxes and get the same federal spending benefits. It doesn’t matter what state you live in,” he said.

The advantages of being independent from the federal government

There are also significant advantages to living in a state that is less economically dependent on the federal government.

“Government programs come and go. They are subject to the winds and fluctuations of politics. And so if you have a larger portion of your population receiving benefits, like SNAP or TANF, and the feds cut those programs, your state could suffer more,” Svec said.

Thus, he said, residents of Massachusetts are more immune to political whims than residents of other states.

Likewise, Bethune said, our economy is better protected against shifts in political priorities, since our largest industries are not dependent on receiving federal dollars.

As a result, Bethune said, being less economically dependent on the federal government could allow our representatives in Congress to tackle a wider range of priorities.

“Once you have more resources on the net transferred to your state, then it takes a tremendous amount of ongoing effort to make sure you don’t lose them,” he said. “…So that’s an advantage is that your representatives in Washington don’t have to spend a lot of time trying to make sure their piece of the pie doesn’t go down.”


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