States with the Best & Worst Taxpayer ROI

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.

Main Findings

 

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

*“Per Capita” includes the population aged 18 and older.
 

 

Red States vs. Blue States

 

Detailed 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	72.94	2	2	6	1	3
2	North Dakota	65.57	15	1	19	4	1
3	Virginia	63.12	5	33	7	5	7
4	Vermont	62.89	6	11	2	37	6
5	Connecticut	61.29	4	18	8	9	30
6	Wisconsin	61.20	1	20	13	16	16
7	Wyoming	60.80	18	27	10	12	2
8	Iowa	60.45	16	10	11	6	10
9	Massachusetts	59.23	10	3	9	22	43
10	Utah	59.07	17	21	14	2	33
11	Nebraska	58.07	23	14	20	3	9
12	New Jersey	58.02	9	17	3	8	50
13	Maine	57.37	27	8	1	41	23
14	New Hampshire	57.36	30	7	4	13	36
15	Delaware	55.50	7	29	33	15	5
16	Rhode Island	55.29	20	4	5	40	42
17	Maryland	54.42	3	28	30	10	29
18	South Dakota	52.90	39	6	29	21	4
19	Indiana	51.92	12	37	27	24	12
20	Washington	51.74	14	19	24	19	44
21	Colorado	51.50	31	5	36	7	18
22	New York	51.42	13	26	15	46	34
23	Illinois	50.66	19	23	23	26	31
24	Idaho	50.65	42	30	12	23	20
25	Ohio	50.58	26	25	17	29	37
26	Pennsylvania	50.23	32	16	16	27	40
27	Kentucky	50.13	21	31	18	44	25
28	Hawaii	50.03	35	13	22	17	38
29	Michigan	49.73	28	24	26	20	28
30	Florida	48.56	8	35	35	38	26
31	Kansas	48.17	36	9	39	11	21
32	Montana	47.77	33	12	38	28	15
33	California	46.84	11	15	34	36	49
34	Georgia	46.82	25	47	28	25	27
35	North Carolina	46.20	22	49	32	33	11
36	Oregon	44.27	43	22	31	35	32
37	Texas	44.14	37	36	37	18	41
38	Missouri	43.70	29	34	40	14	47
39	West Virginia	41.81	45	41	21	50	35
40	Oklahoma	40.27	24	46	42	30	46
41	Nevada	40.16	46	39	41	32	17
42	Tennessee	40.00	34	38	46	34	14
43	Arkansas	39.41	38	40	45	31	13
44	Mississippi	36.57	50	44	25	48	45
45	Alabama	36.11	47	43	44	42	22
46	Arizona	36.02	48	42	43	39	39
47	Alaska	34.92	40	48	49	45	8
48	South Carolina	34.06	44	50	47	43	24
49	New Mexico	32.53	49	32	50	47	19
50	Louisiana	30.49	41	45	48	49	48

 

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.

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?
4. What's the most common way local governments waste taxpayer dollars?
5. What are the most efficient ways for local governments to mitigate the fiscal impact of the pandemic?

Methodology

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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