2018’s States with the Best & Worst Taxpayer ROI
3:05 AMPosted by: John S Kiernan
Tax Day can be a painful reminder of how much we have to invest in federal, state and local governments, though many of us are unaware of exactly what they give us in return. As a result, this creates a disconnect in the minds of taxpayers between the amount of money we should fork over every April and how much we deserve in return.
Perhaps that’s why, according to WalletHub’s Taxpayer Survey, 55% of U.S. adults feel they pay too much in taxes and why 90% don’t think that the government uses tax revenue wisely. We do know, however, that taxpayer return on investment, or ROI, varies based where one lives. Federal income-tax rates are uniform across the nation, yet some states receive far more federal funding than others. But federal taxes and support are only part of the story.
Different states have dramatically different tax burdens. This begs the question of whether people in high-tax states receive superior government services. Likewise, are low-tax states more efficient or do they receive low-quality services? In short, where do taxpayers get the most and least bang for their buck?
WalletHub aimed to answer that question by contrasting state and local tax collections with the quality of the services residents receive in each of the 50 states within five categories: Education, Health, Safety, Economy, and Infrastructure & Pollution. Our data set includes a total of 25 key metrics. Read on for our findings, methodology and commentary from a panel of experts.
- Main Findings
- Red States vs. Blue States
- Detailed Breakdown by State
- Ask the Experts: Taxes as an Investment
- Methodology
Embed on your website<iframe src="//d2e70e9yced57e.cloudfront.net/wallethub/embed/3283/taxpayerROI2.html" width="556" height="347" frameBorder="0" scrolling="no"></iframe> <div style="width:556px;font-size:12px;color:#888;">Source: <a href="https://ift.tt/2H21swV>
Federal Taxes Paid vs. Spending Received by State
‘Taxpayer ROI’ Rank (1=Best) |
State |
‘Total Taxes Paid per Capita’ Rank* |
‘Overall Government Services’ Rank |
---|---|---|---|
1 | New Hampshire | 3 | 2 |
2 | Florida | 2 | 31 |
3 | South Dakota | 10 | 14 |
4 | Colorado | 14 | 13 |
5 | Virginia | 17 | 9 |
6 | Alaska | 1 | 49 |
7 | Missouri | 5 | 35 |
8 | Texas | 6 | 36 |
9 | Utah | 21 | 10 |
10 | Iowa | 36 | 3 |
11 | Nebraska | 28 | 11 |
12 | Georgia | 11 | 39 |
13 | South Carolina | 4 | 42 |
14 | Arizona | 12 | 37 |
15 | Wisconsin | 35 | 6 |
16 | Tennessee | 8 | 41 |
17 | Idaho | 23 | 20 |
18 | Oklahoma | 13 | 40 |
19 | Ohio | 15 | 32 |
20 | Indiana | 25 | 22 |
21 | Kansas | 30 | 16 |
22 | Montana | 16 | 33 |
23 | North Carolina | 19 | 30 |
24 | Alabama | 9 | 47 |
25 | Maine | 32 | 18 |
26 | Illinois | 34 | 15 |
27 | Rhode Island | 33 | 19 |
28 | Michigan | 27 | 29 |
29 | Pennsylvania | 31 | 25 |
30 | Oregon | 26 | 34 |
31 | Kentucky | 22 | 38 |
32 | Wyoming | 39 | 17 |
33 | Washington | 37 | 24 |
34 | Louisiana | 7 | 50 |
35 | New Jersey | 41 | 12 |
36 | Massachusetts | 43 | 7 |
37 | Minnesota | 47 | 1 |
38 | Mississippi | 18 | 45 |
39 | Connecticut | 46 | 8 |
40 | West Virginia | 24 | 44 |
41 | Maryland | 40 | 27 |
42 | Delaware | 42 | 23 |
43 | Nevada | 29 | 43 |
44 | New Mexico | 20 | 48 |
45 | Vermont | 48 | 4 |
46 | New York | 44 | 21 |
47 | North Dakota | 50 | 5 |
48 | California | 45 | 28 |
49 | Arkansas | 38 | 46 |
50 | Hawaii | 49 | 26 |
*“Per Capita” includes the population aged 18 and older.
Embed on your website<iframe src="//d2e70e9yced57e.cloudfront.net/wallethub/embed/3283/taxpayerROI1.html" width="700" height="450" frameBorder="0" scrolling="no"></iframe> <div style="width:700px;font-size:12px;color:#888;">Source: <a href="https://ift.tt/2H21swV>
Red States vs. Blue StatesDetailed Breakdown by State
Overall Gov’t. Services Rank (1=Best) |
State |
Total Score |
‘Education’ Rank |
‘Health’ Rank |
‘Safety’ Rank |
‘Economy’ Rank |
‘Infrastructure & Pollution’ Rank |
---|---|---|---|---|---|---|---|
1 | Minnesota | 79.04 | 5 | 1 | 8 | 2 | 4 |
2 | New Hampshire | 72.22 | 16 | 2 | 3 | 4 | 13 |
3 | Iowa | 71.88 | 3 | 4 | 13 | 7 | 20 |
4 | Vermont | 69.61 | 9 | 8 | 1 | 26 | 14 |
5 | North Dakota | 69.25 | 23 | 12 | 17 | 6 | 3 |
6 | Wisconsin | 68.99 | 1 | 18 | 11 | 10 | 35 |
7 | Massachusetts | 68.63 | 2 | 3 | 9 | 17 | 44 |
8 | Connecticut | 67.78 | 4 | 11 | 6 | 24 | 36 |
9 | Virginia | 67.67 | 6 | 24 | 7 | 9 | 32 |
10 | Utah | 66.11 | 18 | 14 | 15 | 1 | 31 |
11 | Nebraska | 64.74 | 29 | 13 | 19 | 5 | 7 |
12 | New Jersey | 64.62 | 8 | 23 | 5 | 12 | 49 |
13 | Colorado | 64.05 | 24 | 9 | 26 | 3 | 12 |
14 | South Dakota | 62.35 | 41 | 5 | 32 | 15 | 1 |
15 | Illinois | 62.21 | 10 | 17 | 22 | 22 | 30 |
16 | Kansas | 61.92 | 25 | 10 | 30 | 8 | 11 |
17 | Wyoming | 61.75 | 35 | 34 | 16 | 18 | 2 |
18 | Maine | 61.50 | 28 | 19 | 2 | 37 | 24 |
19 | Rhode Island | 61.08 | 22 | 7 | 4 | 45 | 38 |
20 | Idaho | 59.84 | 40 | 27 | 10 | 11 | 8 |
21 | New York | 59.79 | 13 | 21 | 12 | 40 | 39 |
22 | Indiana | 59.05 | 19 | 31 | 28 | 14 | 25 |
23 | Delaware | 58.60 | 7 | 44 | 40 | 23 | 6 |
24 | Washington | 58.26 | 15 | 16 | 29 | 20 | 45 |
25 | Pennsylvania | 56.91 | 21 | 20 | 14 | 31 | 43 |
26 | Hawaii | 56.33 | 38 | 6 | 21 | 34 | 26 |
27 | Maryland | 55.70 | 17 | 22 | 27 | 16 | 50 |
28 | California | 55.47 | 12 | 15 | 31 | 41 | 48 |
29 | Michigan | 55.43 | 32 | 28 | 23 | 21 | 37 |
30 | North Carolina | 54.81 | 11 | 47 | 33 | 36 | 18 |
31 | Florida | 54.57 | 14 | 37 | 37 | 38 | 27 |
32 | Ohio | 54.16 | 30 | 25 | 18 | 29 | 46 |
33 | Montana | 54.07 | 36 | 26 | 38 | 30 | 5 |
34 | Oregon | 52.26 | 44 | 30 | 25 | 43 | 9 |
35 | Missouri | 51.85 | 26 | 35 | 41 | 19 | 34 |
36 | Texas | 51.27 | 27 | 33 | 36 | 13 | 47 |
37 | Arizona | 50.74 | 34 | 32 | 42 | 35 | 21 |
38 | Kentucky | 50.48 | 37 | 36 | 20 | 42 | 40 |
39 | Georgia | 50.20 | 33 | 45 | 35 | 27 | 19 |
40 | Oklahoma | 49.39 | 20 | 41 | 39 | 25 | 42 |
41 | Tennessee | 45.94 | 39 | 42 | 44 | 28 | 15 |
42 | South Carolina | 45.10 | 31 | 43 | 48 | 39 | 22 |
43 | Nevada | 44.85 | 45 | 39 | 45 | 32 | 16 |
44 | West Virginia | 43.36 | 50 | 38 | 24 | 48 | 41 |
45 | Mississippi | 42.62 | 47 | 50 | 34 | 49 | 29 |
46 | Arkansas | 42.53 | 46 | 40 | 46 | 33 | 23 |
47 | Alabama | 42.49 | 43 | 48 | 43 | 44 | 28 |
48 | New Mexico | 40.79 | 48 | 29 | 49 | 50 | 10 |
49 | Alaska | 38.54 | 42 | 49 | 50 | 46 | 17 |
50 | Louisiana | 37.31 | 49 | 46 | 47 | 47 | 33 |
For more insight into how taxpayer funds are turned into government services as well as how taxpayers can measure the efficiency with which their money is used, we turned to a panel of economics and public-policy experts. You can check out their bios and responses to the following questions below.
- Do states with high tax burdens provide better government services?
- How can state and local governments use tax revenue more efficiently?
- How can average citizens assess the ROI of their local tax dollars?
- What's the most common way local governments waste taxpayer dollars?
- Stacey Jurhree Coordinator of the Political Science/Government Department and Coordinator of the Eastfield College Scholarship Institute at Eastfield College
- David Schleicher Professor of Law at Yale Law School
- Joel Newman Professor of Law at Wake Forest University School of Law
- Gil Manzon Associate Professor of Accounting at Boston College
Do states with high tax burdens provide better government services?
States with higher tax burdens do not necessarily provide better government services, because in many cases, the services are not allocated equally. Also, the middle class has to carry most of the heavy tax burdens, as is the case with the state of California. The state of California has heavy tax burdens, but the government services are inadequate. The state is full of tent cities and people are exiting the state by the thousands. We are having a great deal of them coming to the Dallas-Fort Worth area, where I live.
How can state and local governments use tax revenue more efficiently?
States and local governments can use revenue taxes more efficient by using metro government or letting the privatization of some of its revenues to be distributed more accurately.
How can everyday citizens assess the ROI of their local tax dollars?
Citizens can assess their ROI of their everyday local tax dollars by seeing improvements in their neighborhoods in the areas of infrastructures, community programs, and better educational institutions, and ways to have better citizen and police relationships.
What’s the most common way local governments waste taxpayer dollars?
The number one way that local governments waste taxpayers’ money is allowing individuals to be over programs who do not have any expertise in the programs they are implementing. Also, local governments are full with elected officials who lack the political, economic, and social skills to develop and make sound intellectual judgments. This is a major problem I see in Dallas. As a result, the taxpayers’ money is being wasted through trial and error.
David Schleicher Professor of Law at Yale Law SchoolDo states with high tax burdens provide better government services?
States and localities with more tax revenue generally do have better services. This is not the same thing as having higher tax rates. If state or local residents have high incomes or lots of property wealth, rates can be lower and still generate lots of revenue. Revenue is a necessary, if not sufficient condition for having good public services.
How can state and local governments use tax revenue more efficiently?
There’s not one way to answer this question. Different programs use money more or less effectively and there are many sources of waste. For instance, subway construction and operations in New York City are much, much more expensive than they are in comparable cities, like London and Paris. But there are many reasons for this, not just one. Politicians ask for excessively fancy stations, workers ask for employees to be hired to do things that could be automated, bureaucrats in different organizations refuse to cooperate, and so forth.
If I had to isolate one tool for using revenue more efficiently, it would be to empower individual officials and hold them publicly accountable. Mayors, governors and county executives are prominent enough that they can be monitored by voters and public interest groups in ways that myriad legislators and other officials cannot be. This publicity and potential accountability gives them better incentives. Giving these officials lots of power, asking them to govern directly, and then making cost overruns, their problem should lead to greater efficiency. As Mark Twain’s Pudd’nhead Wilson said, “Put all your eggs in one basket and watch that basket.”
How can everyday citizens assess the ROI of their local tax dollars?
Voters have little capacity to assess ROI on a project by project basis -- the information burden is just too high, and people have lives and things to do. The best thing voters can do to ensure good ROI is to support watchdogs of public finance. That means supporting local newspapers, who can send reporters to cover local budgets and projects; supporting local interest groups and think tanks that study local budgets and can produce reports about how money is being spent; and encouraging governments to set up officials to watch public projects like inspector generals (and state finance officials that monitor local budgets). The key is creating institutions to watch public money.
Voters can also punish political parties who spend money badly at the state level. Voters generally use their votes in state elections to comment on national politics -- voting for state legislators based on whether they are in the same party as Donald Trump or Barack Obama. But this encourages waste. State legislators know they will get re-elected no matter what they do, because voters will vote for them based on national issues, and so have little incentive to be careful with public money. To the extent voters can separate state politics from national politics in their heads, they will get better governance at the state and local level.
One other thing that voters can do is to look at real debt loads. Around the country, pension systems are frequently wildly underfunded, as politicians seek to avoid costs today. But this is just debt that will have to be paid off in the future. Politicians who promise they can provide services without taxing are selling snake oil and are likely larding the state up with lots of debt that some future politician will have to deal with.
Joel Newman Professor of Law at Wake Forest University School of LawHow can state and local governments use tax revenue more efficiently?
User fees. Toll roads are the best-known example. The burden of building and maintaining toll roads is, at least in theory, borne entirely by those who choose to use them. Those who don't use them don't have to pay the toll. If toll revenue is insufficient to maintain the road, then it is inefficient, and should be abandoned. The congestion caused by stopping to pay tolls can be cured by an automatic E-ZPass system.
The problem with user fees is that they are sometimes used to block access to government services which must be available to all in a democracy. All citizens, for example, should have access to the courts to enforce their rights. If courts charge user fees which some citizens cannot afford, then democracy is impaired. If, however, we are careful to keep user fees low enough to ensure access to government services for all, then they would increase efficiency.
Gil Manzon Associate Professor of Accounting at Boston CollegeI would note that the general proposition that you get what you pay for seems to be borne out; the often heard canard of "waste and abuse" of taxpayer dollars is usually just that, e.g., people elect leaders who more or less deliver what they want. While the stakes are far higher -- and the dollars, too -- at the federal level, low-tax states generally have poor state-provided social services to go along with them.
It’s also worth noting that the big dog in the room for many states is unfunded pension benefits. Here, the value has been received through work effort of covered employees but not paid for by their employers. Net result: paying today for services you may or may not have benefited from yesterday. To the extent that a state has large unfunded pensions, say as a proportion of tax base, the taxpayers are going to get a depressed ROI -- unless they leave or renege on past promises.
MethodologyIn order to determine which states yield the best and worst return on investment (ROI) for taxpayers, WalletHub compared the quality of government services received by residents to the total state and local taxes they pay in each of the 50 states.
First, we analyzed each state across five key government-service categories: 1) Education, 2) Health, 3) Safety, 4) Economy and 5) Infrastructure & Pollution. The categories were further broken down into 25 relevant metrics, which are listed below with their corresponding weights. Each metric was graded on a 100-point scale, with a score of 100 representing the best quality of government service.
We then determined each state’s weighted average across all 25 metrics to calculate its “Overall Government Services Score.” Finally, we constructed the Taxpayer ROI ranking by comparing each state’s “Overall Government Services Score” to its “Total Taxes Paid per Capita.” “Per Capita” includes the population aged 18 and older.
Education – Total Points: 20- Quality of Public University System: Double Weight (~7.27 Points)Note: Based on data from WalletHub’s College & University Rankings.
- Quality of School System: Double Weight (~7.27 Points)Note: Based on data from WalletHub’s States with the Best & Worst School Systems ranking.
- Public High-School Graduation Rate: Half Weight (~1.82 Points)
- Projected Public High School Graduation Rate Increase Between 2016-2017 and 2031-2032: Half Weight (~1.82 Points)
- Share of Idle Youth: Half Weight (~1.82 Points)Note: This metric refers to people ages 18-24 not attending school, not working, and with no degree beyond high school.
- Hospital Beds per 1,000 Residents: Full Weight (~2.50 Points)
- Quality of Public Hospitals: Double Weight (~5.00 Points)Note: Based on data from Centers for Medicare & Medicaid Services
- Average Life Expectancy at Birth (in years): Full Weight (~2.50 Points)
- Infant-Mortality Rate per 1,000 Live Births: Full Weight (~2.50 Points)
- Average Health-Insurance Premium: Full Weight (~2.50 Points)
- Quality of Health Care: Double Weight (~5.00 Points)Note: Based on data from WalletHub’s States with the Best & Worst Health Care ranking
- Violent-Crime Rate per Capita: Double Weight (~10.00 Points)
- Property-Crime Rate per Capita: Full Weight (~5.00 Points)
- Fatalities per 100 Million Vehicle Miles Traveled: Full Weight (~5.00 Points)
- Median Annual Household Income: Double Weight (~5.00 Points)Note: Adjusted for cost of living
- Annual Job-Growth Rate: Full Weight (~2.50 Points)Note: Adjusted for population growth
- Share of Residents Living Below Poverty Line: Full Weight (~2.50 Points)
- Economic Mobility: Full Weight (~2.50 Points)
- Unemployment Rate: Double Weight (~5.00 Points)
- Underemployment Rate: Full Weight (~2.50 Points)
- Quality of Roads & Bridges: Double Weight (~6.66 Points)
- Average Commute Time (in minutes): Full Weight (~3.33 Points)
- Parks & Recreation Expenses per Capita: Full Weight (~3.33 Points)
- Water Quality: Full Weight (~3.33 Points)
- Air Pollution: Full Weight (~3.33 Points)
Sources: Data used to create this ranking were collected from the U.S. Census Bureau, Bureau of Labor Statistics, National Center for Education Statistics, Western Interstate Commission for Higher Education, The Annie E. Casey Foundation, Kaiser Family Foundation, Institute for Health Metrics and Evaluation, National Highway Traffic Safety Administration, Centers for Medicare & Medicaid Services, Natural Resources Defense Council, Centers for Disease Control and Prevention, United Health Foundation, Council for Community and Economic Research, Road Information Program, The Equality of Opportunity Project, Federal Bureau of Investigation and WalletHub research.
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