Ranking States by “Bang for the Buck”

Source: WalletHub

by James A. Bacon

Most people would acknowledge that there is a trade-off between taxes on the one hand and the quality of government services on the other. It takes money to fund good schools, colleges, infrastructure, criminal justice systems and other basic services. At the risk of over-simplifying, the red state model for state-and-local governance errs to the side of lower taxes, while the blue state model errs to the side of more generously funded government services.

Then there is the body of thought that low taxes and quality government services are both desirable, and that the goal should be to generate the best services per tax dollar expended.

Now comes WalletHub, the financial services website and compulsve list compilers, with a ranking that addresses this very point. Which states deliver the most bang for buck? By WalletHub’s estimate, Virginia does a good job — 4th best in the country.

That’s reassuring. I suspect that Virginia’s high ranking reflects its “purple” state coloring of Virginia’s electorate and the strong two-party competition that prevents either party from indulging the worst instincts of its political base. (I can think of no other reason why Virginia would fare so well — it certainly can’t be our system of governance, which caters to the political class in so many ways.)

Of course, the survey ranking is only as valuable as the methodology that stands behind it. WalletHub compiled 20 metrics to gauge the quality of government services in education, health, public safety, economy and infrastructure & pollution. Then it compared each state’s Average “Government Service” Score to its “Total Taxes per Capita (Population Aged 18 & Older)” Ranking in order to provide a clear ROI hierarchy for taxpayers across the 50 states.

According to this ranking, red states have better ROIs overall with an average ranking of 23.4 versus blue states with 27.4.

Unclear, however, is how WalletHub defines a state to be “red” or “blue.” One could argue that Virginia is a blue state because the governor, Terry McAuliffe, is a Democrat. But both bodies of the General Assembly are controlled by Republicans. Similarly, Ohio is judged to be a “blue” state, even though its governor, John Kasich, is a Republican. Perhaps WalletHub should establish a “purple” state category. I would be interested to see how purple states fared by this reckoning.

We can argue over the methodology all day long. The larger, more important point, I believe, is the question that WalletHub is asking: Which states have optimized the tradeoff between taxes and services — who is getting the most bang for the buck? If we can answer that question, we can move on to even more compelling questions: Which policies, strategies and institutions account for the superior results?

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5 responses to “Ranking States by “Bang for the Buck”

  1. I’ve posted before about being skeptical of this site. It’s an aggregation of data, I rarely see much analysis of the data to tease out meaningful variables.

    When you just rely on data, you end up with conclusions such as the City of Richmond has the 7th best public education ROI in the nation:

    https://wallethub.com/edu/cities-with-the-most-least-efficient-spending-on-education/9390/

    But more laughable than Richmond is St. Louis being in the top 20! Wallethub reminds me of Microsoft’s chatbot….when you simply rely on raw data, there are a lot of poor conclusions/outcomes.

    • I agree, that the validity of WalletHub’s methodology is debatable. That’s why I don’t draw any hard-and-fast conclusions from it. Rather, I see the rankings as useful for posing questions and prompting discussion.

      • A question for your question about ROI:

        Do you want public policy to produce an “elite” elite OR

        Do your want public policy to provide the most bang for the buck for all?

        Obviously, anyone would like to see both, but I think policy visions tend to produce one or the other. Both have pluses and minuses for ultimate societal outcomes.

        I tend to think economic growth in the 21st century is going to be about producing the smartest, most innovative citizens as companies like the ones mentioned in the Case article are being manned by some very bright people.

  2. “Most people would acknowledge that there is a trade-off between taxes on the one hand and the quality of government services on the other.”

    I don’t think “most people” would necessarily agree with that. Basic services can be paid for with reasonably low levels of taxation. It is when (too often) government gets involved in everything and anything that taxes get too high and government quality goes down.

    Too little taxes – bad, as we can’t supply needed services.
    Too much taxes – bad, as we will find wasteful or corrupt ways to spend all the money we collect.

  3. I’m surprised the chart shows Delaware is shown as being higher-taxed than Maryland ?? In fact, Southern Delaware is a popular retirement haven for retirees from Maryland and New Jersey seeking lower personal taxes. This is possible because the tiny state with its tiny population, for decades has gotten windfall revenue from busloads of out-of-state gamblers visiting its casinos, as well as from having the nation’s most permissive incorporation laws, that have attracted some 250,000 corporations to incorporate in Delaware.

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