Geography matters. Where taxpayers live makes a big difference in the services they receive for local and state taxes.
Everyone shoulders the same federal income tax burden, but citizens in each state pay very different local taxes. Whether those who pay more in their home states benefit from correspondingly superior government services is an open question.
Perhaps low-tax states are more efficient.
WalletHub, an online provider of tools and information for financial decision making, sought to answer this question by contrasting state and local tax rates with the quality of services funded at those levels.
In a new study, researchers separated 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.
They then then compared each state’s average government service ranking with its ranking from WalletHub’s recent report on the states with the highest and lowest tax rates.
The result was a clear return-on-investment hierarchy for taxpayers across the 50 states and the District of Columbia.
(Related story on ThinkAdvisor: 10 Best & Worst Tax States for Retirees)
“A few states are in the sweet spot in terms of charging low tax rates and providing superior government services,” WalletHub’s senior analyst John Kiernan said in an email response to questions.
Many others are on the opposite end of the spectrum, Kiernan said, and some low-tax states offer relatively poor government services.
“The reasons why the highest ROI states rank where they do run the gamut from natural resources to population demographics to pure efficiency,” he said.
Following are the 10 states that give taxpayers the best and the 10 that give the worst return on investment in terms of infrastructure, education, health, safety, economy, and water and air quality.
Best Taxpayer Value
Tax Rate Rank: 21
Overall Government Services Rank: 7
Massachusetts is the sixth safest state in the country, while its health and educational systems both rank 12 and its economy 14. The quality of the Commonwealth’s air and water quality ranks 26, and its infrastructure 42.
Tax Rate Rank: 14
Overall Government Services Rank: 5
Utah ranks second for the strength of its economy and fifth for its health system. It is also the seventh safest state in the country, and has the 10th best infrastructure. The state ranks 20 for its water and air quality, and 39 for its education system.
8. (tie) Texas
Tax Rate Rank: 7
Overall Government Services Rank: 24
Texas has the 10th strongest economy among all states, the 14th best health system and 17th best education system. The Lone Star State ranks 31 for infrastructure, 33 for safety and 42 for its water and air quality.
8. (tie) Florida
Tax Rate Rank: 4
Overall Government Services Rank: 36
Florida’s highest ranking comes in infrastructure, 20, education, 21, and air and water quality, 28. It ranks 35 for its health system, and 40 for both safety and economy.
Tax Rate Rank: 10
Overall Government Services Rank: 11
Colorado has the fifth best water and air quality in the country, ninth strongest economy and 11th best health system. The state’s infrastructure ranks 17, education 22 and safety 32.
5. North Dakota
Tax Rate Rank: 9
Overall Government Services Rank: 14
North Dakota has the third best air and water quality among all states, and fourth best infrastructure and economy. Its health, education and safety are less stellar, at 37, 41 and 44, respectively.
Tax Rate Rank: 6
Overall Government Services Rank: 10
Washington’s health system, air and water quality, education system and safety rank eight, 11, 15 and 16, respectively. Its economy stands at 21, and its infrastructure at 30.
3. South Dakota
Tax Rate Rank: 5
Overall Government Services Rank: 15
South Dakota ranks 2 for clear air and water, 7 for the quality of its infrastructure, 12 for its economy and 13 for its health system. However, it languishes at 43 and 46, respectively, for education and safety.
Tax Rate Rank: 2
Overall Government Services Rank: 26
Alaska stands out as the best state for water and air quality, but also as the unsafest state in the country. It ranks 33 for education, 30 for its health system and 15 for economy.
Tax Rate Rank: 1
Overall Government Services Rank: 13
Wyoming ranks first among the states for the quality of its infrastructure, fourth for the environment and 17th for economy. However, it drops to 41 for safety and 44 for education.
Worst Taxpayer Value
Tax Rate Rank: 30
Overall Government Services Rank: 41
Kentucky’s economy ranks 42, while its water and air quality, health and education systems, stand at 36, 34 and 32, respectively. The state’s infrastructure ranks 22, and its safety 28.
Tax Rate Rank: 12
Overall Government Services Rank: 48
Alabama’s health and education systems are among the worst in the country at 48 and 45, with infrastructure at 43. It ranks 30 for safety, 33 for air and water quality, and 35 for the strength of its economy.
Tax Rate Rank: 50
Overall Government Services Rank: 38
California has the worst water and air quality in the country, and its infrastructure ranks 49 and economy 44. However, the Golden State’s education system is fourth best among all states, and its health system ninth best. The state ranks 26 for safety.
Tax Rate Rank: 25
Overall Government Services Rank: 45
Tennessee’s health system and safety both stand at 47, while its air and water quality ranks 43 and its economy 39. At the same time, its education system stands at 20, and infrastructure at 23.
6. West Virginia
Tax Rate Rank: 18
Overall Government Services Rank: 47
West Virginia has the worst health system in the country, and second worst infrastructure, and its education system ranks 46. However, its water and air quality ranks 22. The economy stands at 34, and safety at 37.
5. North Carolina
Tax Rate Rank: 35
Overall Government Services Rank: 43
North Carolina’s economy ranks 43, its air and water quality 41 and its infrastructure 39. Education, health and safety come in at 35, 31 and 25, respectively.
4. District of Columbia
Tax Rate Rank: 37
Overall Government Services Rank: 44
The District of Columbia has the second poorest water and air quality in the country, and its health system ranks 48. At the same time, its safety stands at 27, its economy at 29, infrastructure at 34 and education system at 38.
Tax Rate Rank: 17
Overall Government Services Rank: 49
Louisiana’s education system is second worst among all states. On other measures, it ranks 30 for its economy, 31 for air and water quality, 34 for safety, 40 for its health system and 44 for infrastructure.
Tax Rate Rank: 15
Overall Government Services Rank: 51
Mississippi has the worst economy in the country, while its education and health systems rank 49 and 46, respectively. It stands at 24 for safety, 35 for infrastructure and 39 for air and water quality.
Tax Rate Rank: 31
Overall Government Services Rank: 50
Arkansas is one of the least safe states in the country, ranking 48. The economy stands at 44, and the health system at 43. The state’s water and air quality ranks 39, infrastructure 36 and education system 30.
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