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 in April – or July, as is the case this year due to COVID-19 – and how much we deserve in return.
Perhaps that’s why, according to WalletHub’s Taxpayer Survey, 60 percent of U.S. adults feel they pay too much in taxes and why 88 percent 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. Different states have also received vastly different amounts of COVID-19 aid this year.
Federal taxes and support are only part of the story, though. 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 31 key metrics. Read on for our findings, methodology and commentary from a panel of experts.
State and Local Taxes Paid vs. Spending Received by State
‘Taxpayer ROI’ Rank
‘Total Taxes Paid per Capita’ Rank*
‘Overall Government Services’ Rank
*“Per Capita” includes the population aged 18 and older.
Red States vs. Blue States
Detailed Breakdown by State
Overall Gov’t. Services Rank
‘Infrastructure & Pollution’ Rank
Ask the Experts
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?
- What are the most efficient ways for local governments to mitigate the fiscal impact of the pandemic?
Ask the Experts
In 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 31 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 31 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 (~5.71 Points)
Note: Based on data from WalletHub’s College & University Rankings.
- Quality of School System: Double Weight (~5.71 Points)
Note: Based on data from WalletHub’s States with the Best & Worst School Systems ranking.
- Public High-School Graduation Rate: Half Weight (~1.43 Points)
- Projected Public High School Graduation Rate Increase Between 2018-2019 and 2031-2032: Half Weight (~1.43 Points)
- Share of Idle Youth: Half Weight (~1.43 Points)
Note: This metric refers to people ages 18-24 not attending school, not working, and with no degree beyond high school.
- States with Voucher Programs: Half Weight (~1.43 Points)
Note: This binary metric measures the presence or absence of school voucher programs in a state. School voucher programs are a type of school choice. These state-funded programs – often called scholarship programs – allow students to use public monies to attend a private school. The state provides a set amount of money, typically based on the state’s per-pupil amount, for private school tuition.
- Presence of Free Community College Education: Half Weight (~1.43 Points)
- State Pre-K Funding per Preschool- Enrolled Children: Half Weight (~1.43 Points)
Health – Total Points: 20
- WalletHub "States with the Best Health Infrastructure for Coronavirus" Score: Triple Weight (~5.45 Points)
Note: This metric is based on WalletHub’s "States with the Best Health Infrastructure for Coronavirus" ranking.
- Hospital Beds per 1,000 Residents: Full Weight (~1.82 Points)
- Quality of Public Hospitals: Double Weight (~3.64 Points)
Note: Based on data from Centers for Medicare & Medicaid Services.
- Average Life Expectancy at Birth (in years): Full Weight (~1.82 Points)
- Infant-Mortality Rate per 1,000 Live Births: Full Weight (~1.82 Points)
- Average Health-Insurance Premium: Full Weight (~1.82 Points)
- Quality of Health Care: Double Weight (~3.64 Points)
Note: Based on data from WalletHub’s States with the Best & Worst Health Care ranking.
Safety – Total Points: 20
- 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)
Economy – Total Points: 20
- 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 in Poverty: 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)
Infrastructure & Pollution – Total Points: 20
- Quality of Roads & Bridges: Double Weight (~5.00 Points)
- Average Commute Time (in minutes): Full Weight (~2.50 Points)
- Parks & Recreation Expenses per Capita: Full Weight (~2.50 Points)
- State Highway Spending per Driver: Full Weight (~2.50 Points)
- Water Quality: Full Weight (~2.50 Points)
- Share of Population Who Receive Fluoridated Water Through CWSs (Community Water Systems): Full Weight (~2.50 Points)
- Air Pollution: Full Weight (~2.50 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, Campaign for Free College Tuition, National Institute for Early Education Research, Kaiser Family Foundation, American Medical Association, Insurance Institute for Highway Safety, Centers for Medicare & Medicaid Services, Natural Resources Defense Council, Centers for Disease Control and Prevention, Federal Highway Administration, United Health Foundation, Council for Community and Economic Research, Road Information Program, Equality of Opportunity Project, Federal Bureau of Investigation and WalletHub research.
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