Red States Get Better Return on Taxpayer Dollars, Study Says

Residents of states led by Republican governors tend to get a better return on their tax dollars than states run by Democrats, according to a new study from WalletHub that gives high marks to a group of mostly red states.

Of the 10 best states for taxpayer return on investment, eight are run by Republican governors, with Virginia and Colorado representing the only exceptions. Overall, the average red state ranks roughly 10 spots higher than the average blue state.

Top States for Return on Taxpayer Dollars

1. New Hampshire

2. South Dakota

3. Florida

4. Virginia

5. Georgia

6. Ohio

7. Missouri

8. Utah

9. Colorado

10. Nebraska

States were ranked according to the quality of the government services they provide, based on outcomes related to education, health, safety, economics, and infrastructure and pollution. Data from government agencies and third-party institutions such as the Kaiser Family Foundation and the American Medical Association were used to determine the quality of individual states’ government services. Those services scores were then compared with states’ tax collection totals to see which state’s residents are getting the best return on their tax dollar investments.

The report’s methodology isn’t particularly kind to high-tax, high-population states such as California and New York, which rank 49th and 45th for taxpayer return on investment, respectively. Among the bottom 10 states in the rankings, seven are run by Democratic governors: Hawaii, California, Connecticut, New York, New Mexico, Louisiana, Delaware. The only exceptions were Arkansas, North Dakota and Vermont.

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On the study’s Economy metric, which includes factors such as median household income, poverty rates and economic mobility, California and New York rank 40th and 45th, respectively. In the third quarter of 2019, the two states collectively accounted for nearly a quarter (22.7%) of America’s current-dollar gross domestic product, according to the Bureau of Economic Analysis. Meanwhile, the top 10 states based on return on investment collectively accounted for less than 20% of U.S. GDP in July, August and September.

New Hampshire, the top state for both taxpayer return on investment and total taxes paid per capita, does not collect income taxes or sales taxes — though property taxes are relatively high in the Granite State compared with the rest of the country. Its low tax rates offset the fact that it scores in the bottom half of the country for government services related to education (31st) and infrastructure and pollution (35th).

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On the other hand, Hawaii, which scored last for return on investment, in part because of its high tax rates, was judged to have had the 11th-best economy and 13th-best health services provided by its state government.

Americans will have an extra couple of weeks to submit their taxes to the Internal Revenue Service, thanks to the Trump administration’s decision to extend the federal tax deadline into July to grant consumers more immediate access to capital in the wake of the ongoing coronavirus outbreak. As of March 25, more than 62,000 Americans have been confirmed to be infected with the virus, according to data from Johns Hopkins University. Federal and state governments have been working to cushion the economic blow of widespread business closures and expectations of mass layoffs.

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