2018’s 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 every April and how much we deserve in return.

Perhaps that’s why, according to WalletHub’s Taxpayer Survey, 55% of U.S. adults feel they pay too much in taxes and why 90% 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. But federal taxes and support are only part of the story.

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 25 key metrics. Read on for our findings, methodology and commentary from a panel of experts.

Main Findings

 

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

*“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	79.04	5	1	8	2	4
2	New Hampshire	72.22	16	2	3	4	13
3	Iowa	71.88	3	4	13	7	20
4	Vermont	69.61	9	8	1	26	14
5	North Dakota	69.25	23	12	17	6	3
6	Wisconsin	68.99	1	18	11	10	35
7	Massachusetts	68.63	2	3	9	17	44
8	Connecticut	67.78	4	11	6	24	36
9	Virginia	67.67	6	24	7	9	32
10	Utah	66.11	18	14	15	1	31
11	Nebraska	64.74	29	13	19	5	7
12	New Jersey	64.62	8	23	5	12	49
13	Colorado	64.05	24	9	26	3	12
14	South Dakota	62.35	41	5	32	15	1
15	Illinois	62.21	10	17	22	22	30
16	Kansas	61.92	25	10	30	8	11
17	Wyoming	61.75	35	34	16	18	2
18	Maine	61.50	28	19	2	37	24
19	Rhode Island	61.08	22	7	4	45	38
20	Idaho	59.84	40	27	10	11	8
21	New York	59.79	13	21	12	40	39
22	Indiana	59.05	19	31	28	14	25
23	Delaware	58.60	7	44	40	23	6
24	Washington	58.26	15	16	29	20	45
25	Pennsylvania	56.91	21	20	14	31	43
26	Hawaii	56.33	38	6	21	34	26
27	Maryland	55.70	17	22	27	16	50
28	California	55.47	12	15	31	41	48
29	Michigan	55.43	32	28	23	21	37
30	North Carolina	54.81	11	47	33	36	18
31	Florida	54.57	14	37	37	38	27
32	Ohio	54.16	30	25	18	29	46
33	Montana	54.07	36	26	38	30	5
34	Oregon	52.26	44	30	25	43	9
35	Missouri	51.85	26	35	41	19	34
36	Texas	51.27	27	33	36	13	47
37	Arizona	50.74	34	32	42	35	21
38	Kentucky	50.48	37	36	20	42	40
39	Georgia	50.20	33	45	35	27	19
40	Oklahoma	49.39	20	41	39	25	42
41	Tennessee	45.94	39	42	44	28	15
42	South Carolina	45.10	31	43	48	39	22
43	Nevada	44.85	45	39	45	32	16
44	West Virginia	43.36	50	38	24	48	41
45	Mississippi	42.62	47	50	34	49	29
46	Arkansas	42.53	46	40	46	33	23
47	Alabama	42.49	43	48	43	44	28
48	New Mexico	40.79	48	29	49	50	10
49	Alaska	38.54	42	49	50	46	17
50	Louisiana	37.31	49	46	47	47	33

 

Ask the Experts: Turning Taxes Into an Investment

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?

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 25 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 25 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 (~7.27 Points)
  Note: Based on data from WalletHub’s College & University Rankings.
• Quality of School System: Double Weight (~7.27 Points)
  Note: Based on data from WalletHub’s States with the Best & Worst School Systems ranking.
• Public High-School Graduation Rate: Half Weight (~1.82 Points)
• Projected Public High School Graduation Rate Increase Between 2016-2017 and 2031-2032: Half Weight (~1.82 Points)
• Share of Idle Youth: Half Weight (~1.82 Points)
  Note: This metric refers to people ages 18-24 not attending school, not working, and with no degree beyond high school.

Health – Total Points: 20

• Hospital Beds per 1,000 Residents: Full Weight (~2.50 Points)
• Quality of Public Hospitals: Double Weight (~5.00 Points)
  Note: Based on data from Centers for Medicare & Medicaid Services
• Average Life Expectancy at Birth (in years): Full Weight (~2.50 Points)
• Infant-Mortality Rate per 1,000 Live Births: Full Weight (~2.50 Points)
• Average Health-Insurance Premium: Full Weight (~2.50 Points)
• Quality of Health Care: Double Weight (~5.00 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 Below Poverty Line: 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 (~6.66 Points)
• Average Commute Time (in minutes): Full Weight (~3.33 Points)
• Parks & Recreation Expenses per Capita: Full Weight (~3.33 Points)
• Water Quality: Full Weight (~3.33 Points)
• Air Pollution: Full Weight (~3.33 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, Kaiser Family Foundation, Institute for Health Metrics and Evaluation, National Highway Traffic Safety Administration, Centers for Medicare & Medicaid Services, Natural Resources Defense Council, Centers for Disease Control and Prevention, United Health Foundation, Council for Community and Economic Research, Road Information Program, The Equality of Opportunity Project, Federal Bureau of Investigation and WalletHub research.