As you know, your tax bill is about more than the federal income tax. You also have to pay state taxes. State taxes differ according to where you live, with some states charging higher rates than others — and some states don’t collect income tax at all (although they might raise revenue from other taxes).
One of the arguments for the collection of taxes is that many of the services we enjoy as part of society come as the result of pooled resources. States can fund infrastructure, healthy, public safety, education, and more. But are the services you receive worth what you pay in taxes?
Recently, Wallet Hub completed a study analyzing taxpayer ROI for all 50 states plus the District of Columbia. The verdict? Wyoming offers the best bang for taxpayer buck, with the lowest tax rate and a rank of 13 in overall government services. (Other states might offer better government services, but they also have the higher tax rates to go along with them.)
The worst state for taxpayer ROI, according to the Wallet Hub analysis, is Arkansas. It’s tax rate is at 31, with its government services offered at a 50. So the taxes are still higher than half the states, but the government services offered don’t really justify the tax rates. My own state, Utah, isn’t too bad, ranking 9 in terms of taxpayer ROI; it’s nice to know that my state is in the top 10 in terms of returning value for my taxpayer dollar.
Wallet Hub also analyzed states according to major political party affiliation, as measured by which way the presidential vote went in 2012. According to the average rank, Democrat leaning states offer a slightly better ROI overall. However, before blue states get too excited about it, the difference in average rank was only 2.55 points, so, really, there isn’t a very big difference at all.
Why State Taxes Matter
Your state taxes do matter. The revenue your state collects is used to pay law enforcement, fund education, and pay for roads and other infrastructure. Many states also use some of their funding for social services like unemployment benefits. While some of the money for social services comes from federal funding, the states also help out.
Paying state taxes, whether it’s done through gasoline taxes, income taxes, sales taxes, and any number of taxes that the state collects go toward services that many of us enjoy. That goes for federal taxes as well. We don’t usually think of all of the things that we accept as trappings of a civilization as things that need to be paid for, but they are.
Of course, whether or not you feel like your state government is spending taxpayer dollars wisely is a completely different issue. That’s where something like the Wallet Hub report could come in handy. If you are interested in moving to a state where you know that you will get the best return (in government services) for your taxpayer buck, that might make a difference in how you feel about paying your taxes.