States with the Best & Worst Taxpayer ROI

by John S Kiernan

Wallet Hub Best Worst Taxpayer ROIThere is an obvious disconnect in the minds of taxpayers between the amount we fork over each April and what we ultimately receive from the government in return.  Tax Day is a tangible, painful reminder of our investments in federal, state and local governments, but it’s difficult to discern the government’s precise role in our day-to-day quality of life and overall pursuit of happiness.  Perhaps that’s why 52% of people feel they pay too much in taxes and most people think roughly half of their tax dollars are being wasted.

One thing we do know is that taxpayer return on investment varies significantly based on simple geography.  Federal income tax rates are uniform across the country, yet some states get far more federal funding than others – as WalletHub recently illustrated in its Federal Government Dependency Report.  But federal taxes and funding are only part of the story.

Ideological differences regarding the role of local taxation have resulted in citizens of each state shouldering dramatically different tax burdens.  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.  In short, where do taxpayers get the most and least bang for their buck?

WalletHub sought to answer that question by contrasting state and local tax rates to the quality of the services that are funded at those levels, which we separated into six main categories – Infrastructure, Education, Health, Safety, Economy and Pollution – that collectively consist of 27 metrics.  You can read more about our methodology as well as review our complete findings below.

Main Findings

 

ROI Rank

State Name

Tax Rate Rank

Overall Government Services Rank

1 Wyoming 1 13
2 Alaska 2 26
3 South Dakota 5 15
4 Washington 6 10
5 North Dakota 9 14
6 Colorado 10 11
T-7 Florida 4 36
T-7 Texas 7 24
9 Utah 14 5
10 Massachusetts 21 7
11 Nevada 3 46
12 Montana 19 19
13 New Hampshire 28 4
14 Virginia 27 8
15 Delaware 8 39
16 New Mexico 11 37
17 Minnesota 38 1
18 Kansas 33 9
19 Indiana 16 32
20 Vermont 45 2
21 Iowa 43 6
22 Hawaii 29 21
23 Oklahoma 20 31
T-24 Nebraska 49 3
T-24 Rhode Island 22 30
26 Idaho 34 20
27 Arizona 13 40
28 Oregon 40 17
29 Connecticut 48 12
30 Missouri 24 32
31 Wisconsin 46 16
32 New Jersey 44 18
33 Maryland 41 22
34 Ohio 32 29
35 Maine 42 23
36 Georgia 26 35
37 Pennsylvania 39 27
38 New York 51 25
39 Illinois 47 28
40 Michigan 36 34
41 South Carolina 23 42
42 Kentucky 30 41
43 Alabama 12 48
T-44 California 50 38
T-44 Tennessee 25 45
46 West Virginia 18 47
47 North Carolina 35 43
48 District of Columbia 37 44
49 Louisiana 17 49
50 Mississippi 15 51
51 Arkansas 31 50

Detailed Breakdown by State

Taxpayer ROI report

Overall Gov Services Rank

State

Infrastructure Rank

Edu Rank

Health Rank

Safety Rank

Econ Rank

Pollution Rank

1 Minnesota 5 7 2 9 3 9
2 Vermont 21 1 20 3 23 6
3 Nebraska 15 8 3 22 1 23
4 New Hampshire 51 5 7 1 11 17
5 Utah 10 39 5 7 2 20
6 Iowa 26 13 1 18 6 30
7 Massachusetts 42 12 12 6 14 26
8 Virginia 24 3 32 11 8 29
9 Kansas 12 24 4 36 5 17
10 Washington 30 15 8 16 21 11
11 Colorado 17 22 11 32 9 5
12 Connecticut 48 10 22 2 17 23
13 Wyoming 1 44 27 41 7 4
14 North Dakota 4 41 37 44 4 3
15 South Dakota 7 43 13 46 12 2
16 Wisconsin 14 2 17 29 19 38
17 Oregon 3 29 19 19 47 7
18 New Jersey 47 9 29 8 18 33
19 Montana 2 42 15 38 25 8
20 Idaho 6 37 10 20 26 25
21 Hawaii 33 47 6 5 32 10
22 Maryland 28 6 35 15 13 45
23 Maine 41 26 21 10 37 11
24 Texas 31 17 14 33 10 42
25 New York 39 14 16 14 36 37
26 Alaska 11 33 30 51 15 1
27 Pennsylvania 32 11 42 31 20 35
28 Illinois 19 25 24 12 27 48
29 Ohio 25 16 37 13 31 44
30 Rhode Island 45 40 41 4 50 14
31 Oklahoma 46 36 25 41 16 17
T-32 Indiana 38 19 33 17 28 46
T-32 Missouri 29 31 25 39 22 32
34 Michigan 37 28 45 23 44 11
35 Georgia 18 17 28 21 41 49
36 Florida 20 21 35 40 40 28
37 New Mexico 8 48 18 48 33 16
38 California 49 4 9 26 44 51
39 Delaware 13 22 44 34 24 46
40 Arizona 16 34 23 43 48 27
41 Kentucky 22 32 34 28 42 36
42 South Carolina 27 27 39 50 49 20
43 North Carolina 39 35 31 25 43 41
44 District of Columbia 34 38 48 27 29 50
45 Tennessee 23 20 47 47 39 43
46 Nevada 9 51 50 45 38 15
47 West Virginia 50 46 51 37 34 22
48 Alabama 43 45 48 30 35 33
49 Louisiana 44 50 40 34 30 31
50 Arkansas 36 30 43 48 44 39
51 Mississippi 35 49 46 24 51 39
Taxpayer ROI

 

Ask The Experts: Turning Taxes Into an Investment


What's the correlation between state taxes and the government services?

I would guess about 0.6. It is positive for sure but not close to 1.

- Nathaniel Baum-Snow,  Brown University


Generally, higher tax rates likely mean more resources and higher spending. The latter, all else equal, will boost service quality. However, there is one caveat. In wealthy jurisdictions, the scenario makes sense. But in a poor jurisdiction with lower fiscal capacity or a weak tax basis, higher tax rates only reflect efforts to catch up with other wealthy jurisdictions with lower rates but higher tax revenues. There is no guarantee that service quality will necessarily be improved in poor districts with high tax rates.

- Jay Ryu, Ohio University


Other things being equal, I think there is a broad tendency for higher state and local tax revenues (not the same as rates, obviously) to associate with better services.  Studies looking at combined state-local education spending per student have sometimes found that higher spending is associated with better student performance, though not all studies agree with that.

In some policy areas, the difficulty of doing the job affects the cost of services; building highways in mountains or in large cities is vastly more expensive per mile than building highways on flat, level, rural ground that isn't very valuable.  The higher spending due to the greater difficulty of doing a job can create big slippages between spending and program quality.  At the local level, very poor jurisdictions may have to adopt pretty high tax rates in order to generate enough money for basic services, but they won't produce very high tax revenues, so they don't end up with above-average funding levels.

The declining state financial support for higher education across the country has led to dramatic increases in tuition and fees, and the shift from scholarships to loans has meant lots of students graduate with very heavy debt burdens.  A number of other countries, however, have been expanding access to higher education while we have been reducing access.  As a result, we have gone from having the largest proportion of our young people in college of any country in the world to being about 14th in the world.

The relationship can also be complicated by whether there are incentives to hold down costs or not.  The US has the highest level of health care spending, per person, of any country in the world, yet a number of other countries have better health outcomes (average life expectancy, infant mortality rates, etc.) than we do.  Part of this is because our system generates a great deal of administrative overhead and neglects some relatively inexpensive activities, such as vaccinating children, that affect health outcomes a good deal.

- David Nice, Washington State University


Probably not. The services delivered vary quite widely from state to state and local government to local government (within a state and nationwide). This makes the sort of comparison quite hard. Having lived in 10 states across the country I have personally seen substantial differences in the level and quality of services. Some of what drives these differences is based on need. In Georgia there is not a high level of demand for snow plowing, for example, because they don't get much snow. When they do things grind to a halt for a few days, but it doesn't make sense to prepare for that event with massive levels of capital spending on snow plows. While in Ohio, where I currently live, they have to spend a lot on plows, drivers, salt, and sand because we get a ton of snow. This weather also tears up the roads – costing tons of money.

States also put mandates or devolve certain tasks to local governments in different ways across the country. In New York State counties deliver Medicaid – thus those local taxes are going to be much higher than in state where that is not delivered at the local level but by states.

There are also different expectations or demands of services at varying levels of government. New York has as part of its constitution some guarantees of a social safety net, thus that tax and spend more on those programs than some other states where that is not part of the fabric of the state.

Here in Cuyahoga County, Ohio we have assistance to Vets being provided at the local level. I personally think this is great, in that those vets can get help locally more easily to reintegrate into civilian life and any other challenges that they might face, but I haven't seen that same level of attention or spending on what is ostensibly a national program (the military) at the local level. Some might ask, why isn't the Pentagon or VA providing better service to these vets? Again we made this choice locally (a very long time ago) to do this.

- Benjamin Y. Clark, Cleveland State University


There is some correlation between state and local tax rates and the quality of government services but with a diminishing rate of return. When government services are underfunded, increased funding thanks to increased tax revenues has a very close correlation. But, any additional funding after the optimal level of service quality will not improve the service quality as much, and thus will lead to waste and inefficiency (according to Pareto).

- Khi V. Thai, Florida Atlantic University


Generally speaking governments that spend more (usually measured as per capita spending) have higher quality services; however, complications arise because it's just not tax rates that determine how much a government spends. For example, a city with low property values usually will have a higher tax rate than a city with higher property values, but the city with higher property values will generate more revenue and have higher per capita spending. So spending is a function of rate and tax base, not one or the other. There is a measured called tax effort that attempts to capture both items but it is not generally published. Some states, such as Florida, use tax effort as part of a formula to redistribute state sales tax shared with cities and counties. So a city which shows a high tax effort (usually a high rate with a low tax base) will get more state sales tax per capita than a low tax effort city (usually with a low tax rate and high tax base). This is a form of revenue sharing.

It is also somewhat complicated at the state level because some states rely more on income taxes and others rely more on sales taxes. With different bases it is hard to determine tax effort, but in general higher taxed states tend to have higher quality services, higher median incomes, lower unemployment and more economic output than lower taxed states.

- John Topinka, University of Memphis


Intuitively, I would think the correlation is probably not different from zero. However, without a precise statement of what is meant by state and local tax rates and quality of government services it is really impossible to say. How does one consider sales, income and property tax rates in the "state and local tax rates"? What about states that have no income tax or that rely on severance taxes?

- Dennis Coates, University of Maryland Baltimore County


Some places opt for high taxes and high services others opt for low taxes and low services. I don't think there is much evidence that places with high taxes are any more or less efficient--in the sense that the value per dollar of tax revenue is higher or lower--than places with low taxes.

- David Merriman, University of Illinois at Chicago


Higher tax rates in a given jurisdiction leads to more revenue, which should mean higher quality services, more police on the street, better teachers, more frequent trash collection, etc.

If you are asking about the relationship between revenue and quality of services, there is waste and inefficiencies, so perhaps on average expenditures might be cut by around 10% without reducing the quality of services. But that would still mean a high correlation.

If you mean the correlation for a given individual, than the correlations vary widely across households. Everyone pays the same tax rate, but widely different level of taxes. And, the quality of service (or perhaps more appropriately, the quantity of services) varies widely. For example, households with no children get little benefit from education.

- David Sjoquist, Georgia State University


I believe the correlation between tax rates and the quality (and quantity) of government services is possible under the right circumstances. We can tax citizens and business at a high rate, but mismanagement of funds and poor planning may undermine potential returns for a state or community. Thus, for revenues to be effectively used for purposes that the public desires, we need participatory budgetary process, long term strategic planning, and accountability.

- Tad Conner, New Mexico State University


How do you think people prioritize various gov. services?

From local government spending perspective:

  1. safety
  2. education
  3. infrastructure
  4. health
  5. economy
  6. pollution

I put economy and pollution last because from local government spending perspective these are the two priorities they have least influence on...health sort of in the same manner.

- Benjamin Y. Clark, Cleveland State University


An average taxpayer, I think, will prioritize the above services as follows:

  1. Safety
  2. Education
  3. Health
  4. Economy
  5. Pollution
  6. Infrastructure.

- Khi V. Thai, Florida Atlantic University


It's been a while since I reviewed national survey data, but historically citizens have had the same general priorities:  education and safety always being the highest.  Infrastructure unfortunately is somewhat of a hidden problem.  Of course everyone complains about pot holes in streets, but water and sewer systems, airports, sewers, interstate highways as well as state and local roads are only high priorities when something tragic happens-like the bridge collapsing in Minneapolis a few years ago. These things are often taken for granted.  Health and pollution are also of concern to many people but it's harder to single out specifics unless of course there is some triggering event.  Overall, the public is more attuned to environmental problems and solutions that they themselves can deal with.

I would note that almost all infrastructure projects are funded by user fees and not income, sales or property taxes.  Most roadway funding comes from a tax on gasoline. Water and sewer customers pay by volume they generate; those who use airports and seaports pay for them: landing fees, concessions, parking, per passenger fees.  Generally, no tax money goes into these operations.

- John Topinka, University of Memphis


My guess: economy (though without having a concrete idea of what that means, possibly focused largely on jobs), safety, education, infrastructure, health,  and pollution

- Dennis Coates, University of Maryland Baltimore County


Studies show that the local public service that residents must value is education. 'Safety' in the sense of insulation from crime is probably second.  Of course, people also care about "Economy" in the sense of access to high quality jobs but that generally depends much more on the metropolitan area one lives in.

Infrastructure is largely a concern of business and much less so to most residents.

- David Merriman, University of Illinois at Chicago


1. Safety; 2. Economy; 3. Education; 4. Infrastructure; 5. Health; 6. Pollution.

- David Sjoquist, Georgia State University


As someone who studies ideology and partisanship at the state and local level, this is a very difficult question to answer definitively. I believe the order of priorities will depend on an individual’s core values and beliefs that shape the way they see problems and solutions in the world as well as the proper role of government in society. The order of priorities will also fluctuate with what individuals see as the most pressing issues at the time, which I could imagine would include issues of access to quality healthcare in more rural communities as well as education and employment in others.

- Tad Conner, New Mexico State University


How can state and local governments use tax revenue more efficiently?

1) Reduce the cost of raising tax revenue: simple broad based taxes. Some estimates find that it costs $1.50 for the Federal Income Tax to raise a dollar in revenue.

2) Reduce conflict of interest so elected officials are not voting on own pay increase.

3) The efficiency of organizations depends on the quality of the people and the quality of the leadership.

4) Outsource when others can be more efficient.

5) Create a city that people want to live in.

- John Horowitz, Ball State University


I have long given up my hope of governments using money more efficiently. But my personal opinion is that there should be some centralized monitoring of cost. Performance-based budgeting, albeit flawed, might police over some waste. But not too much control because it will cause other inefficiencies. Overall, some central monitoring will be a quick fix. In the long run, governments better provide services that citizens want, and those at the amount they exactly demand. This concept is what economists refer to as allocative efficiency.

- Jay Ryu, Ohio University


One step, which many states and localities are using to varying degrees, is using more evaluation analysis of major programs to get a more precise reading on the effectiveness of those programs.  Unfortunately, those analyses are sometimes overwhelmed by ideological considerations that may be more important to state/local officials than evaluation research.  The recent push to discourage people from voting in a number of states has been justified by claims that the changes will reduce ballot fraud, yet the legislative hearings on a number of the bills have produced little or no systematic evidence of ballot fraud, and some of the policy changes, such as reducing the number of days for early voting and making absentee ballots more difficult to obtain, have nothing to do with ballot fraud.

We see a similar dynamic with health care reform.  A number of the states that have fought against the 2010 health care reforms have unusually high shares of their populations without health care coverage (public or private) and have been making less progress in improving health care access than have the states that have cooperated with the Affordable Care Act.

One other example is the death penalty.  Evaluation researchers have reached very diverse conclusions regarding whether the death penalty helps to discourage violent crime, and the Innocence Project, which operates out of Northwestern University's Law School, has found a number of innocent people on death row in various states.  Nonetheless, the death penalty is taken for granted in some states as a good way to deal with murderers.

One difficulty in gauging citizen perceptions of the returns on investment that they receive from state-local taxes is that many Americans are not very well informed regarding state-local government finances.  A survey in the Pacific Northwest that was done several years ago found that many people in the state of Washington thought we had a state personal income tax (we don't) and that many people in Oregon thought their state had a general sales tax (it doesn't).  Moreover, large numbers of people in both states didn't know that education was the most costly state-local government program.  It reminded me of a couple of national surveys done in the 1980s on national government finances.  Both surveys found that about 40% of the respondents thought that the most costly federal program was foreign aid, which is a tiny share of the federal budget.

- David Nice, Washington State University


One underserved factor here is the review of tax expenditures (tax credits, deductions, abatements). This is a place where governments give them out, reducing tax revenues (spending through the tax code rather than direct spending) and rarely go back and make sure they are actually doing what they say they are doing. This happens at all levels of government (fed, state, local). This would be one area I would argue we need to start with.

- Benjamin Y. Clark, Cleveland State University


State and local governments can use tax revenues more efficiently by using performance indicators (quantity and quality), and program evaluation analysis for budget decisions. They should avoid cases of "rewarding failure" (for example, increasing funding policing because of increased crime rates, which may be the consequences of bad police performance).

- Khi V. Thai, Florida Atlantic University


Of course governments use tax revenue to buy services; they pay employees, they contract out, etc. About 80% of the cost of general government services at the local level (police, fire, parks, libraries, etc. are for personnel (salary and fringe benefits). Governments are by nature labor intensive. Because of this, the major advances in technology that have spurred much private sector productivity improvements lag in the public sector. That leaves local governments with fewer tools to become more efficient, but a number have adopted principles of Six Sigma and lean and many more routinely capture performance data about their operations and use this information to make better operational and budgeting decisions. This a national performance measurement project on going since the mid-1990s led by the International City/County Managers Association and several similar efforts at the state level. Best practices are often published and shared at a variety of conferences every year. A majority of larger cities and counties have routinely done strategic plans with regular updates; this is a priority generating process so at least those services with the highest priority get funded.

States deal more with aid to families in need with a large part of their revenue (some coming from the feds); such entitlement spending changes with the economy. So it's not driven by efficiency but by the national and perhaps regional job market, among other items. States have paid close attention to issues of efficiency and many have established detailed strategic plans, with specific objectives tied to the budget (Oregon, Washington, Iowa and Maryland are good examples). All of this is an attempt to be efficient but more importantly for targeted effectiveness.

- John Topinka, University of Memphis


Focus more on infrastructure, education, and safety, and less on projects touted to foster economic development and create jobs, especially when those projects are brought to the attention of government by people with a stake in the project.

- Dennis Coates, University of Maryland Baltimore County


State and local governments should focus on basic public services like education, transportation, and public safety. They should generally not cut deals with specific firms of industries. Governments should do benefit-cost analysis much more frequently (State of Washington is a good example) and should do long-term fiscal planning.

- David Merriman, University of Illinois at Chicago


Constantly monitor expenditures and outcomes; compare expenditure levels against a set of peer jurisdiction; survey citizens about service quality.

- David Sjoquist, Georgia State University


In my opinion, information, planning, and feedback are crucial to using tax revenues not only more efficiently, but also more effectively by looking at both cost of providing services and outcomes.

- Tad Conner, New Mexico State University


Methodology

WalletHub sought to determine where taxpayers get the best and worst return on their investment by examining state and local tax payments through the prism of the services that are funded at those levels.

We divided those services into six main categories – Infrastructure, Education, Health, Safety, Economy and Pollution – and evaluated 27 total sub-metrics designed to gauge the quality and efficiency of government operations in each area.  We then compared each state’s Average Government Service Ranking to its ranking from our recent report on the States with the Highest & Lowest Tax Rates, ultimately arriving at a clear ROI hierarchy for taxpayers across the 50 states and the District of Columbia.

Each overall category was given equal weight in this analysis.  The following is a breakdown of the specific metrics that we used as well as the weights we assigned to each.

Infrastructure = 1

  • Quality of Roads & Bridges:  0.4
  • Public Transportation Usage Percentage:  0.2
  • Average Commute Time:  0.2
  • Park & Recreation Expenses Per Capita:  0.1
  • Walkability:  0.1

Education = 1

  • State K-12 Public School Rank:  0.3
  • State University System Rank:  0.4
  • Public HS Graduation Rate:  0.3

Health = 1

  • Number of State and Local Hospitals per 100,000 Inhabitants:  0.2
  • Public Hospital System Rank:  0.2
  • Average Life Expectancy:  0.2
  • Infant Mortality Rate Per 1,000 Live Births:  0.2
  • Out-of-Pocket Medical Expenses:  0.1
  • Average Health Insurance Premium:  0.1

Safety = 1

  • Violent Crime Rate per 100,000 Inhabitants:  0.3
  • Fatalities per 100 Million Vehicle Miles of Travel:  0.3
  • Number of “Under the Influence” Traffic Violations per 100,000 Inhabitants:  0.2
  • Sex Offenders per 100,000 Inhabitants:  0.1
  • Youth Incarceration Rate per 100,000 Inhabitants:  0.1

Pollution = 1

  • Water Quality:  0.5
  • Air Pollution:  0.5

Economy = 1

  • Unemployment Rate:  0.3
  • Average Income/ Cost of Living:  0.3
  • Annual Rate of Job Growth, Adjusted for Population Growth:  0.1
  • Home Price Volatility:  0.1
  • Percentage of Residents Living Below the Poverty Line:  0.1
  • Economic Mobility Rank:  0.1

Sources: The data used to compile this report is courtesy of the U.S. Census Bureau, U.S. Bureau of Labor Statistics, National Center for Education Statistics, U.S. News & World Report, TRIP, Environmental Working Group, America's Health Rankings, FBI, Annie E. Casey Foundation, Parents for Megan’s Law and the Crime Victims Center, National Highway Traffic Safety Administration, Medicare.gov, Manhattan Institute, Families USA, Social Science Research Council, Centers for Disease Control and Prevention, Missouri Economic Research & Information Center, The Equality of Opportunity Project, and WalletHub research.

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John Kiernan is Senior Writer & Editor at Evolution Finance. He graduated from the University of Maryland with a BA in Journalism, a minor in Sport Commerce & Culture,…
1181 Wallet Points
Call me critical but I find the measures used to create the rankings to be eccentric at best. The Dept of Education recently compared the 5 biggest states on academic achievement and spending. TX led in all but one testing category and spent the least per pupil. Yet your study ranks CA in the top 5? And crime is demographics driven, policing has very little to do with it . Your low crime leaders are just a bunch of
older, whiter states. And is it a coincidence that the 3 states with the biggest cities have the worst water quality? This survey isn't measuring government performance it's measuring state status. It's like pointing out that the kids of Beverly Hills have better teeth than those of Watts and attributing it to the efficiency of each community's dentists. Sheesh.
May 7, 2014  •  Reply  •  Flag
IMHO (forgive my simplicity) government should not be compared like a business would be because it's not one. Government's responsibility is to provide various services to its citizen who pay for them. The more that is done with actual tax dollars without the need for user fees, like taking a class at a park department, should not happen because the availability to citizens is automatically reduced; therefore, this kind of user fee is a deterrent. On the other
hand, traffic fines or court fees, also called user fees by some, are designed to deter individuals from breaking laws. These fees only work in a limited way and neither assure crime is reduced nor affect overall behavior of some. Further, as a Kansas, I don't see where the current tax mess being tried in the State of Kansas as being proffered by Sam Brownback is reflected in this report in any way. Just as Ronald Reagan, another so-called conservative, created a mess from which the U.S. still has not climb away, Brownback's legislative priorities of creating an income tax free population reliant on a sales tax in order to convince companies and people Kansas is where they want to be one-year into it is a colossal failure from which Kansas citizens may never recover (I realize never is a long time--but that's my point).
May 5, 2014  •  Reply  •  Flag
One obvious flaw is the political identity associated with at least one state, NC. NC is correctly identified as Republican; however, that only occurred in 2010 and included Governor, House, and Senate. For "many" years prior to 2010, Democrats dominated. So it is recommended you look at some level of history, say 30 years or an appropriate number, and the come up with a weighted factor such as 90D10R for 90% Democrat, 10% Republican to show
a weighting effect. 50D50R would represent approx. a 50/50 contribution. 10D90R would show an overwhelming Republican affect.
May 4, 2014  •  Reply (1)  •  Flag
One very BIG obvious flaw with your reasoning is that you'd have to heavily weight the republicans actions before you compared them to the democrats because the republicans made drastic cuts to education and other services in the state. Just the cuts to education would drag the republicans down to about a 50/50 match. And the way they are passing draconian laws by the time those are factored in, the republicans will be responsible for 90% of the drop.
May 14, 2014  •  Reply  •  Flag
Does this normalize for different costs associated with providing services that individual states may face. For instance, Kansas is a physically large state which makes maintaining high quality roads a more expensive proposition than say Rhode Island. Likewise, California may face special geologic difficulties in providing quality water and housing markets in Arizona and Florida may be volatile for reasons completely outside the state's control. If ROI doesn't take into account how these sorts of things may jack up the
price of services in a particular location, I'm not sure that the comparison across states is really fair. It suggests that states may be doing something wrong or being inefficient in cases where they are not. I also question whether including all these things in a return on investment really makes sense or really makes sense for all states. A return on investment should measure the results of what people have invested in. If a state, for instance, chose to invest very little in crime control but ended up with a crime rate somewhere in the middle, you could argue that objectively that's a good return on investment. But your just measuring everything regardless of whether the people of a state chose to invest in the things your measuring or not and then presenting it as some kind of overall efficiency rating. That really doesn't make sense.
Apr 23, 2014  •  Reply  •  Flag
John,

I hope I'm not trolling with my first post here, but I notice that states with highest ROI don't appear in your "Detailed Breakdown". In other words, they ranked best for ROI, but didn't rank in the top 5 in any of the categories you used to determine best states for ROI (low crime, best water, etc). Wyoming for example, ranks 1st for ROI, but only appears in your "detailed breakdown" once— fifth place for low crime. No where else does Wyoming appear in the breakdown. Texas doesn't appear at all.
It would seem you only looked at income tax. Texas, for example, has no income tax, but some of the highest property taxes in the country. In California, income taxes are among the highest, but prop taxes are relatively low (prop 13).

Perhaps if you looked at overall tax burden in a state, you could get a better picture of ROI, but I guess every individual is in different circumstances, so that would work either (eg, doesn't own a home vs. does own a home— prop taxes, etc).

Bottomline: there are no free lunches— looking at "low tax states" vs. "no tax states" may be useful, but saying a state ranks FIRST for ROI simply because they have no income tax is of little value. (your top 11 states are comprised of the 6 states that have no income tax; I'd bet the remaining 5 have very low state income taxes)
Apr 23, 2014  •  Reply  •  Flag
So if low cost effective govt is possible, then that should be the goal: make all services cheaper. Can we all agree on that? Why be wastful? No one can argue for waste.
Apr 22, 2014  •  Reply  •  Flag