2015’s 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 of money we fork over each April and what we ultimately receive in return from the government. Tax Day is a tangible, painful reminder of our investment in the operation of federal, state and local governments, but it’s difficult to discern their precise role in our day-to-day quality of life or 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 provided within the following six categories: Infrastructure, Education, Health, Safety, Economy and Pollution. We used 22 total metrics to do so, and you can read our complete methodology as well as expert commentary below.

Main Findings

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ROI Rank

State Name

Tax Rate Rank

Overall Government Services Rank

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


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Red States vs. Blue States



Detailed Breakdown by State

Overall Gov Services Rank

State Name

Infrastructure Rank

EDU Rank

Health Rank

Safety Rank


Pollution Rank

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


Ask The Experts: Turning Taxes Into an Investment

For more insight into how taxpayer funds are ultimately turned into government services as well as how taxpayers can measure the efficiency with which their money is being used, we turned to a panel of leading economics and public policy experts. You can check out their bios as well as their responses to the following questions below.

  1. Do states with high tax burdens provide better government services?
  2. How can state and local governments use tax revenue more efficiently?
  3. How can average citizens assess the ROI of their local tax dollars?
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  • Suzanne Hollander Professor of Real Estate in the Hollo School of Real Estate at Florida International University
  • David E. Brunori Deputy Publisher at Tax Analysts, and Adjunct Professor at George Washington University’s Trachtenberg School of Public Policy and Public Administration
  • Julie A.D. Manasfi Associate Professor of Law at Whittier Law School
  • Kristin Gutting Associate Professor of Law at Charleston School of Law
  • Lori A. McMillan Professor of Law at Washburn University School of Law
  • William Wood Visiting Associate Professor of Law at Southwestern Law School
  • Yair Listokin Shibley Family Fund Professor of Law at Yale Law School
  • Darien Shanske Professor of Law at University of California-Davis School of Law
  • Beckett G. Cantley Associate Professor of Law at Atlanta’s John Marshall Law School
  • Ivo Welch J. Fred Weston Distinguished Professor of Finance and Director of the Fink Center for Finance and Investments at UCLA Anderson School of Management
  • Joseph Olson Professor of Law at Hamline University

Suzanne Hollander

Professor of Real Estate in the Hollo School of Real Estate at Florida International University
Suzanne Hollander
Do States with high tax burdens provide better government services overall?

That question is hard to determine because property taxes are a function of state, local and county government, at least in the state of Florida, and what can and cannot be taxed in this tax process is heavily regulated by State statute.

For example, in the City of Miami Beach a property owner might think ‘property values are high, I feel as I’m paying a lot of tax, I should be getting a lot of services,’ but the municipality only keeps about 32 cents of those taxes, or even 25 cents and the remaining amount goes for services the State and/or County designates as important to finance. In State of Florida, the school board receives a large percent of each tax payer’s property tax -- whether your kids are in private school or you have no kids, the school board still receives 35% - 40% of the taxes in the state of Florida.

Do you think there is a way that State and local governments can use the tax revenue more efficiently?

Normally by elected officials or staff-appointed by elected officials. In the State of Florida, the County Property Appraiser notifies taxpayers in writing of the dates and times of the public City and County budget hearings where the millage (tax) rate will be determined. The notification comes in August and the budget hearings are normally in August and September. The public may participate in the budget hearings and voice their opinions on how they feel tax dollars should be allocated and at what level the tax rate should be.

Some of my students say ‘do we really make a difference when we go to public budget hearings? The answer is yes, especially if you bring a group of people who are like-minded and they’re in front of their elected officials voicing their opinions on public services. For example, the public participated in Miami Dade County budget hearings and collectively voiced their opinion to keep funding for public libraries, scheduled to be cut. A lot of people who were very upset about cutting public funding to libraries and started a campaign where not only did they exercise their freedom to speak at the public hearings, they also were very public in the newspapers and on TV about the importance of funding public libraries with tax dollars. As a result of this public involvement, the library funding was protected.

There are ways the public may become involved in the taxing process and I think that people don’t always realize that their voice and their vote that they make at the ballot box, is a vote that is in support of many things, including elected officials who share their opinion on how tax dollars should be spent.

How would an average resident or citizen really assess the return on investment of their local tax dollars?

The tax process varies from state to state, and in every state it’s normally very regulated by statutes. Going back to the 5th and 14th Amendments to the U.S Constitution, the reason our country was founded, was that no one wanted taxation without representation or any taking of property without due process.

So, it’s not like your local government just comes up with a tax number and you don’t know where it came from as an owner and you don’t have an opportunity to be involved in the process. You do, you have the opportunity to go to the elected officials and say “I put more value in this type of service than that type and the taxes should be allocated differently.”

David E. Brunori

Deputy Publisher at Tax Analysts, and Adjunct Professor at George Washington University’s Trachtenberg School of Public Policy and Public Administration
David E. Brunori
Do states with high tax burdens provide better government services?

Not necessarily. What states with higher tax burdens generally provide is higher government spending. But the quality of the services is not usually connected to the level of the tax burden. In many of the studies on government efficiency and effectiveness, lower tax burden states fare much better than those with high tax burdens.

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

This is a question that has plagued policy makers for decades. States that evaluate their programs on a regular basis tend to be much more efficient. That is, governments that evaluate annually what and how they are doing tend to do a better job. Again, this is less about the level of government than the quality of the management systems.

How can average citizens assess the ROI of their local tax dollars?

The effectiveness of local tax dollars is much easier to assess than that at the state or federal levels. The services provided are much more obvious and have a more direct impact on citizens' lives. They know whether the potholes are filled, crime is a problem, or if the schools are good. The best evaluation occurs when a citizen decides whether to continue living in the locality. If the tax dollars are high and the schools or transportation are terrible, people vote with their feet. They will eventually move to somewhere more citizen/taxpayer friendly. In my experience, citizens are willing to pay for good local government because they can see it every day.

Julie A.D. Manasfi

Associate Professor of Law at Whittier Law School
Julie A.D. Manasfi
Do states with high tax burdens provide better government services?

Not necessarily. As Wallet Hub’s study demonstrates, there isn’t necessarily a causal relationship between tax burdens and government services provided. For example, Wyoming had the fourth lowest tax burden in the country but it ranked relatively high as having the fourth best overall government services. Similarly, Montana had the third lowest tax burden but it also ranked relatively high at 18th in overall government services.

This also doesn’t necessarily mean that there is no correlation between tax burden and government services. Nebraska, for example, had the highest tax burden in the study and also ranked very high for government services at third. Higher tax burdens result in more government revenue but the real issue is what the states do with the revenue they collect. Think of two families’ grocery shopping with different budgets. Does the family with more money to spend on food necessarily have better meals? No, in fact the family with less money may even do a better job if that family is more efficient in clipping coupons, food preparation and meal planning. Just like in our homes with our grocery money, more money to spend doesn’t necessarily mean better government services. It will depend on whether state and local governments use tax revenue efficiently.

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

State and local governments should have a reliable mechanism for determining which government services its citizens value most and prioritize its spending in that way. This means that it has to get its citizens to participate in some way via data collection, voting or perhaps voting with their dollars and choices.

Just like in a household, the first step in determining your budget is determining what things are important to the family. Once a state or local government has prioritized the government services its citizen’s value, it must reduce waste in providing those services. In our homes for example we can lower our electric bill by turning off all the lights before we leave the house. Most budgets don’t measure wasteful practices. One way to do so is to track where the money is going and red flag waste. In our homes perhaps the red flag of not turning off the lights is our electric bill is higher than in the past or higher than our neighbor’s bill. Next performance must be improved to decrease costs, i.e., by turning off the lights. I think this happens on the front lines with incentivizing state and local employees in some way to replicate the way we are incentivized in our own homes when we get a lower bill.

How can average citizens assess the ROI of their local tax dollars?

For the average citizen to assess the ROI of local tax dollars there must be financial transparency at the local level. It must be in a format that can foster true insight and understanding into local spending as opposed to piles of raw unusable data.

For example, the city that I call home, Manhattan Beach, California, displays its financial information through graphs that show revenue and expenses by fund, department and type. Its citizens can easily assess how much is being spent each year on things like public works, community development, fire, police, parks and recreation, human resources, finance and management services. They can then prioritize what government services they value, determine whether those services are being provided and exactly how much money is being spent to provide those services. Assessment of local spending starts with the financial transparency to make that assessment.

Kristin Gutting

Associate Professor of Law at Charleston School of Law
Kristin Gutting
Do states with high tax burdens provide better government services?

According to various studies, high tax burdens do not always result in better government services. For example, a recent study ranked Illinois as having the highest tax rate, but was ranked in the lower half of the states for overall government services. Alternatively, the same study ranked Wyoming as having one of the lowest tax rates, but as having one of the best overall rated government services. Meaning, high tax burdens do not equal better government services. In my humble opinion, what matters most is how the government spends its tax revenues.

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

This is the million-dollar question. I believe state and local governments (as well as the federal government) should adopt the budgetary practices of the average American family.

For instance, a family with limited funds will prioritize its expenses and search for the most cost effective means to ensure that there are enough funds to pay for the necessities. Once the necessary expenses are paid, the family will then allocate a predetermined amount of the remaining funds to a savings account. In the event there are any additional funds, the family will then, and only then, make extravagant and extraordinary purchases. In doing so, the family eliminates any wasteful spending.

Unfortunately, governments do not think (or operate) this way. Maybe it is because the politicians are playing with someone else’s money or they have never had to cut coupons and live on a budget. Or maybe they are only thinking of their own needs and not the needs of their constituents. It could be that they are trying to satisfy special interest groups for which they benefit. Whatever the reason, governments need to set priorities and stop the wasteful spending. Once the necessities have been provided, politicians can then use any excess funds for the other items (or reduce taxes, which is a strange concept I know).

How can average citizens assess the ROI of their local tax dollars?

Any basic web search would reveal different articles and studies discussing the return on investment for the tax dollars collected by the various local governments. However, these studies might include items as an ROI that an individual does not personally value (i.e., the individual has no interest in a particular government service).

With that being said, I believe each person should make a list of what is important to them, such as education, safety, and parks and recreation. Then, research which services your state offers in these areas and how effective the services are rendered. For instance, see where your state ranks compared to other states in regards to education here.

While most individuals do not relocate to a particular state solely for tax reasons, I strongly recommend everyone research which local government programs or services his or her tax dollars provide and start holding the individuals in charge accountable for how the money is spent (i.e., vote).

Lori A. McMillan

Professor of Law at Washburn University School of Law
Lori A. McMillan
Do states with high tax burdens provide better government services?

Right now, Kansas is in the news more often than it is comfortable with, largely because of tax cuts. Services in Kansas are abysmal. Education is being slashed every budget cycle. The highway infrastructure fund has been raided to pay for these cuts. DMV services have devolved into a joke over how long one needs to wait for service (last time I was in there it took 5 hours…seriously).

So is this particular low-tax-burden state providing decent government services? Not particularly. But it would be easy to overstate this – the question should be more along the lines of ‘do states use the money they have in a manner that provides the services people want?”, because some states have revenues that are not related to income taxes, such as oil revenues or taxes that can be borne by a transient population (tourists) by sales taxes/occupancy taxes, etc.

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

I think a large part of the problem is that these governments look at things from a reactionary position, rather than a strategic long-term position (the nature of politics, really). Again, I’ll use the state of Kansas as an example – the focus there is “we have x amount of money, so we are going to cut everything…” instead of the real question that should be asked – what services do the people of the state want? In Kansas, education is protected in the state constitution, but it keeps getting slashed… so if education is truly important to the people of Kansas, the most efficient way to use tax revenue is to dedicate it to the priorities set by people, and tax the populace the amount needed to fund these priorities. In other words – what do we want, and what do we need to get it, versus how much do we have, and what can we buy for that.

How do we gauge efficiency? Generally speaking, from a law and economics perspective, the role of government is to provide goods and services that can be more efficiently provided by pooling resources than for each individual to purchase on their own. Roads are a perfect example of this. Perhaps efficiency should be a requirement for a government service – if there is no efficiency gained (and I would assume you mean efficiency based on best price, rather than necessarily on social allocation) should the state provide these services? Or should social considerations make it more than just about money? Perhaps there should be an annual survey done to gauge a 5-year plan for budgetary allocations (you can’t operate a budget on a year to year basis, especially for the things a state or local government would be responsible for) and the elected officials have to cleave to these priorities and make them happen, or lose their jobs (rather like the assessments done on teachers – let’s look at results, and if there aren’t measurable results, you lose your job).

How can average citizens assess the ROI of their local tax dollars?

Well, the average person will assess based on things like wait times and the like when accessing government services. For example, I recently changed the title on my car, in order to sell it – and I was told I could wait up to 90 days for my title to be mailed to me, and no, there was no way for them to just print me a copy of my title. That is a terrible ROI for my tax dollars, and it cost me the ability to sell my car to a consumer who wanted to buy it.

Average citizens do not understand much about the workings of the tax system – I have come to this conclusion after a decade of teaching, and time spent volunteering for a low income tax clinic. Given this, I don’t know that expecting them to even comprehend what a ROI is. It again comes down to what could be viewed as a social compact – what legitimacy does the government have to take my money, and spend it on stuff? If that is based in efficiency, then I can assess things like roads – are they well maintained, and sufficient that there is no traffic congestion (given the infrastructure that is possible), education (how well do students perform on the SAT, for example, and the PISA – not state-generated standardized tests), etc. Politics often cloud the ability of the average citizen to assess ROI – while they might applaud a prosecutor who is ‘tough on crime’, who incarcerates every possible offender, economics would state that a person should not be incarcerated unless the costs of the harms they commit outweigh the costs of their incarceration – very few crimes would lead to incarceration if that were the standard used to imprison in this country. What is the quality of drinking water – so often overlooked by taxpayers who take it for granted, but so necessary, and part of the broader question of public health. (So, to answer, ROI can only be unreliably assessed by the average citizen, and will be done with visible indicators like roads, schools, and wait times for government services.)

How should it be done is another question. Government services are what we purchase with our tax dollars. When we access these services, are they provided in such a way that the costs of access are minimized (i.e., do people have to take a day off work just to change a title? What opportunity costs are we forcing people to bear while accessing the services that they have already bought and paid for?)? What would the cost of public health problems be without public health programs? What efficiencies could be had by investing more into infrastructure (the way that the interstate system provided a ROI of more than 6 fold the original investment)?

William Wood

Visiting Associate Professor of Law at Southwestern Law School
William Wood
Do states with high tax burdens provide better government services?

Generally, higher tax burdens result in more government revenues to fund services and, for that reason, potentially better services because there is more money to fund more of them. But higher tax burdens and revenues don’t themselves produce better government services, as your data seem to indicate: that State A has a higher tax burden than State B doesn’t necessarily mean that State A provides better government services.

The issue is really about the quality, or effectiveness and efficiency, of those services and the per-dollar (or relative marginal) return on money spent on them. State X, for example, might provide the same service as State Y, or perhaps even do a better job, with less money because it costs State X five cents (of a tax dollar) to do something that costs State Y ten cents.

How can average citizens assess the ROI of their local tax dollars?

Many local governments have undertaken efforts to measure their performance – and to make these data available to the public – in order to improve their efficiency and provide better services. Los Angeles, for example, has a website with information about, among other things, road quality, traffic, and emergency and other government response times.

Governments today have large amounts of data available to them and can compile and track this data in real time, presenting increased opportunities to measure outputs and improve services so that taxpayers get more for their money. The challenge is to share this data with the public in a way that is accessible, user-friendly, and understandable so that average citizens can actually use it to assess how effectively local governments are using their tax dollars.

Yair Listokin

Shibley Family Fund Professor of Law at Yale Law School
Yair Listokin
Do states with high tax burdens provide better government services?

On balance, yes. There is a strong correlation between state spending on schools and academic performance, for example. Correlation doesn’t imply causation, but the correlation is suggestive.

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

I think that local government spending gets scrutinized more carefully than spending at the state level. When more spending is decided at the local level, I think the revenue gets used more efficiently. But states should redistribute money from rich localities to poor ones to mitigate the unfairness of spending at the local level.

How can average citizens assess the ROI of their local tax dollars?

For people who itemize their taxes, it’s important to remember that a dollar in state and local taxes effectively costs less than a dollar to you because you get a deduction on your federal taxes for local and state taxes. This raises the ROI on local tax dollars.

ROI can be calculated by what it would cost to get these services in the private sector. Parents with children in public schools almost inevitably get a high ROI. If you don’t have child in public schools, it’s more ambiguous. But good schools raise housing values. One well done study found that a bond issue for school financing that gets narrowly passed leads to significant increases in home values relative to bond issues that narrowly fail.

Darien Shanske

Professor of Law at University of California-Davis School of Law
Darien Shanske
How can average citizens assess the ROI of their local tax dollars?

It is essential for citizens to monitor how their tax dollars are spent. Alas, even assessing when a state has a high tax burden is a fraught enterprise. At the state level, much less the federal level, the measures that are often used are not that helpful. For instance, for most citizens, the highest personal income tax rate might be much less relevant than the usual sales tax rate, but it is the top income tax rate that usually gets the headlines. Focusing on the top tax rates also leads to people sometimes drawing odd conclusions, such as that the states with the highest personal income tax rates are the least friendly to the wealthy. This might be true, of course, but it could also be true that a given state has high income tax rates because it has a lot of wealthy residents for some reason other than taxes. Think of Wall Street or Silicon Valley.

But ordinary citizens can hold their governments accountable despite these challenges. Our multi-tiered federal system is in part justified because it is at the local level that citizens can get sound information and can then act on it through voting at the ballot box or with their feet. For instance, citizens of a given school district generally know whether potential new residents are willing to pay a premium to live in that school district. If people are paying a premium, then that likely means, at least in part, that people value the school system even beyond the local taxes that must be paid to support the local schools. In other words, the government has made a good investment. Or, on the other side, suppose your local community is not providing a fundamental local service – such as adequate police protection – if this is a longstanding issue, then it indicates a deep problem. It could be a result of the poor use of tax dollars or it could also be because one lives in a community that does not have sufficient fiscal capacity. It could also be both or neither; citizens on the ground will often have a pretty good idea.

And so in the end I think it is very important for citizens to assess their local situation correctly as a first step for assessing the much harder case of higher-level governments. One reason goes back to De Tocqueville, at least, and that is that the local level is a school for citizenship in general. There is also a more specific lesson that can be learned from attending to how dollars are spent locally. Really understanding a local problem will usually require following leads back up to the state and federal levels. It is a failure of higher-level governments if certain local governments cannot raise sufficient revenue with reasonable taxes. It might also be a failure of higher-level governments if lower-level governments can raise adequate funds, but cannot spend them in ways that add value. Schools might be a good example. Or perhaps not. What I want to emphasize is that in my experience, citizens know a lot more – or at least could know a lot more - about what their governments are up to, without relying on fifty state surveys that are at best very vague.

Beckett G. Cantley

Associate Professor of Law at Atlanta’s John Marshall Law School
Beckett G. Cantley
Do states with high tax burdens provide better government services?

Not necessarily. The data shows that most of the states ranked highly for providing government services have a higher than median tax burden upon their citizens. However, a tax burden of approximately one percent per year separates the middle twenty or so states, so the median can be a misleading metric. Perhaps more telling is that very few of the states imposing the highest tax burdens upon their citizens are ranked highest for government services.

Of course, this does not mean that the states which impose the lowest tax burden upon their citizens provide the best government services. An equally low number of states imposing the lowest tax burden upon their citizens are ranked highest for government services. The preliminary conclusion is, unsurprisingly, that government services cost money, and the states that are best able to provide those services in an efficient and cost effective manner will be those that provide the highest ROI to taxpayers.

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

The easy targets here seem to be increasing the effectiveness of public education systems; streamlining the criminal justice system; reforming public sector employee benefits packages; in some cases, privatizing services currently provided by the state; and reexamining the hierarchy of local governments.

Public education has long been hampered by an unwillingness to accept any sort of a performance based incentive. Private education has embraced these systems and is continually able to outperform public schools. Of course, this risks oversimplifying the differences between public and private education. However, if schools were able to attract the best teachers by rewarding those teachers with bonuses when they did a good job, a concept not at all foreign to any other profession, such a change could move the needle in the right direction. Higher pay would attract the better skilled teachers, higher performing teachers would make for higher performing schools (which could similarly be rewarded with additional resources within the district), higher performing schools would increase the average performance of a district, and so on.

Criminal justice expenditures in aggregate accounted for about 7 percent of state and local expenditures according to a 2010 Federal Reserve Bank of St. Louis report on economic development, with corrections spending accounting for approximately half of this number. The criminal justice policies instituted in the 80s and 90s have led to increasing rates of incarceration even in the face of decreasing crime rates. The efficiency of a system based on jail time is questionable in part due to the high recidivism rate. Moreover, a reexamination of the appropriate punishment for low-level, non-violent drug offenders, for example, could dramatically reduce the resources devoted to housing these prisoners in a state run institution.

How can average citizens assess the ROI of their local tax dollars?

Realistically, this is first going to be an assessment of the taste left in the taxpayer’s mouth when he or she pays his or her tax bill. Taxpayers living in states that impose a higher taxpayer burden may feel that these tax dollars are being well-spent if they are happy with the level of services the government is providing in return. At the other end of the hypothetical spectrum, taxpayers living in states that impose a lower taxpayer burden may feel that even the small amount they are paying is not yielding a satisfactory return if they are receiving inadequate services in exchange.

To objectively quantify these feelings, taxpayers need to have access to information. Government transparency projects, like those undertaken by the Texas comptroller of public accounts office, for example, can go a long way toward winning over the minds of taxpayers. These resources provide the taxpayer with information about his or her local taxing entities and what level of burden is being imposed by each. Once a taxpayer knows what level of income, property and consumption taxes he or she is paying, the taxpayer can compare that information to other nearby locales, as well as those in other states, to more effectively assess how his or her hometown stacks up.

Unfortunately, the onus is on the taxpayer to get involved and learn what his or her rights are and where his or her money is going. One simply cannot expect the taxing authority or legislature to take any action to get the taxpayer involved. If these authorities can sit back and collect and spend tax revenue without having to answer any questions that is certainly the course they will take.

Ivo Welch

J. Fred Weston Distinguished Professor of Finance and Director of the Fink Center for Finance and Investments at UCLA Anderson School of Management
Ivo Welch
Do states with high tax burdens provide better government services?

I can only comment ad-hoc. The republicans and democrats seem to argue endlessly about how much we should tax and deficit spend. Alas, I never hear a discussion of how well the money is spent. This seems strange -- if we can build a good road for cheap, it would seem like a better idea to tax and spend than if we cannot.

I am not a Republican (nor a Democrat), but especially Obama, Brown, and the Democrats have it wrong when they talk about how our government should invest now, without considering how efficient the government is in spending money. I wish they/we would work on getting more bang for the buck.

Case in point: California's high-speed rail could be a good idea if we could built it for cheap. Alas, we can't. It will cost us $70b for 382 miles. That is $100,000 per yard. Pretty awesome when you think about it. Personally, if it were $1,000 a yard, it would seem like a good idea. at $100,000 a yard, it seems insane. 10 yards = $1 million.

Joseph Olson

Professor of Law at Hamline University
Joseph Olson
Do states with high tax burdens provide better government services?


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

Eliminate/consolidate local governments and state agencies.

How can average citizens assess the ROI of their local tax dollars?

They can't because there is so much obfuscation and waste.


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 22 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 Best & Worst States to be a Taxpayer, ultimately arriving at a clear ROI hierarchy for taxpayers across the 50 states.

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: 0.5
  • Average Commute Time: 0.3
  • Park & Recreation Expenses Per Capita: 0.2

Education = 1

  • Public University System Rank: 0.4
  • WalletHub’s School System Rank: 0.6

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

  • Crime Rate per Capita: 0.5
  • Fatalities per 100 Million Vehicle Miles of Travel: 0.3
  • Sex Offenders per Capita: 0.1
  • Youth Incarceration Rate per 100,000 Inhabitants: 0.1

Pollution = 0.5

  • Water Quality: 0.25
  • Air Pollution: 0.25

Economy = 1

  • Unemployment Rate: 0.3
  • Average Income / Cost of Living: 0.2
  • Annual Rate of Job Growth, Adjusted for Population Growth: 0.1
  • Percentage of Residents Living Below the Poverty Line: 0.2
  • Economic Mobility Rank: 0.2


Sources: Data used to create these rankings were obtained from the U.S. Census Bureau, U.S. Bureau of Labor Statistics, National Center for Education Statistics, 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, Federal Bureau of Investigations, TRIP, Environmental Working Group, America's Health Rankings, Annie E. Casey Foundation, Parents for Megan’s Law and the Crime Victims Center, and WalletHub research.


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,…
1930 Wallet Points


By: RustyS
Apr 24, 2015
Wallet Hub has outsmarted itself on its own methodology. The process of gathering the data is very slick, but the comparison of the states contains a major flaw — there's a very strong bias toward the extremes for states with small populations due to the statistical law of regression toward the mean. The larger a state's population, the more likely it is to fall into the middle of the pack, while the low population states read more
Reply Delete Flag
May 7, 2014
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 read more
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By: Ictdco
May 5, 2014
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. read more
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By: Packman68
May 4, 2014
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 read more
By: Meltnmold
May 14, 2014
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 read more
Reply Delete Flag
Apr 15, 2015
@Meltnmold: One EXTREMELY big obvious flaw is that you both missed where they said "states are designated as Red or Blue based on how they voted in 2012 election."
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By: Dmstowe
Apr 23, 2014
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 read more
Reply Delete Flag
Apr 23, 2014

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 read more
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By: Bennash
Apr 22, 2014
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.
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