With tax day just behind us, most Americans feel like they’ve just thrown some of their hard earned income out the window. But whether that feeling is justified depends as much on where you live as it does the amount you had to fork over last week.
“Taxpayer ROI (return on investment) varies significantly based on simple geography,” writes John S. Kiernan for WalletHub. “This, of course, begs the question of whether people in high-tax states benefit from correspondingly superior government services or if low-tax states are more efficient.”
Taxpayer ROI: Ranking government services
To answer the question, Kiernan measured return using 27 metrics divided into six categories: infrastructure, education, health, safety, pollution, and the economy. While there is some wiggle room for deciding how to weight different factors, and local government only has limited control over some metrics (unemployment, violent crime), Kiernan’s average government services rank does give at least a qualitative sense of whether people are getting something in return for their taxes.
He then compares the government services rank against the tax rate rank (which can be measured more directly), and then compared the two to come up with a ranked ROI. This approach ignores the fact that flows between states and the Federal government don’t balance out (some states subsidize others), and assumes that people don’t care about the impact that their taxes have in other parts of the country.
Taxpayer ROI: Wyoming has the best , Arkansas has the worst
By his measure, Wyoming has both the lowest tax rate and the highest tax ROI, followed by Alaska which is second in both categories. The top five is rounded out by South Dakota, Washington, and North Dakota.
Arkansas residents get the worst deal, ranking 31st in taxes paid (where 1st pays the fewest taxes) and 51st in return on investment. Mississippi, which has the worst government services in the country, at least has lower taxes, bringing it in at 50th. Louisiana, Washington D.C., and North Carolina make up the rest of the bottom five.
You might expect that Democratic states tend to have higher tax rates and better government services than Republican states (even if you think government is inefficient, higher taxes get you more of it), but it’s striking just how noisy the results are. While the question of tax ROI is interesting, it doesn’t seem like tax rate is the best indicator for the overall quality of services.
Instead of arguing about the ideal tax rate, we might want to spend some time figuring out how Wyoming gets so much from so little, and Arkansas can’t seem to do anything right.