Do The Taxes You Pay Make Your State a Better Place? Find Out Here

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Tax season is here—and while many gripe about forking money over to Uncle Sam, the real question is: Are your tax dollars being put to good use?

Odds are, you’re aware that certain areas have high taxes, while other places enjoy a lower rate. But rock-bottom taxes aren’t necessarily a good thing if your streets are riddled with potholes and petty crime. Ideally, the money people pay in taxes is used to improve their communities, but a recent study suggests that certain states are much better at this than others.

According to WalletHub‘s Best & Worst Taxpayer ROI rankings for 2023, Americans’ tax payments offer wildly different rates of return on that investment, depending on where they live.

To help break it down, their team of data analysts compared how much residents pay in taxes, on average, to how much those funds end up impacting five key categories of livability: education (graduation rates, pre-K funding), health (number of hospital beds, life expectancy), safety (crime, car crashes), economy (unemployment rate), and infrastructure (water/air quality and bridge/road maintenance).

After sifting through the numbers, the state with the best taxpayer ROI turns out to be little ol’ New Hampshire. While the Granite State ranks third in the amount of taxes paid per capita, it earned the top score in terms of poverty rates and also ranks well for health care and keeping violent crime in check.

Here’s a look at the rest of the states most adept at spending taxes for the greater good.

States With Best Taxpayer ROI

At first glance, these top-ranking states are all over the map, with every quadrant of America represented. But a common thread runs throughout most of them: Seven of the 10 are “red” or Republican leaning, based on how residents voted in the 2022 presidential election.

Why high taxes don’t always mean better services

While optimists might presume that higher-tax states “give back” with more amenities for residents, the fact is that certain state governments run a tight ship, while others might squander their resources.

“High taxes should definitely mean better schools or roads, but that’s not always the case,” says Jill Gonzalez, WalletHub analyst. “ROI shows how states are able to make the most efficient use of their budgets to benefit taxpayers.”

Plus, keep in mind that “it’s difficult to ascertain whether high tax burdens lead to better services, because ‘better’ is a very subjective term,” says Stephen J. Lusch, Ph.D., associate professor of accounting at Texas Christian University.

For instance, if you’re a retiree, you might be pleased that your tax money will fund a senior center. But if you have little kids, you’d rather see the funds used to improve public schools.

If you need any more convincing that a high tax rate does not always translate to better amenities, look no further than New Hampshire’s neighbor Vermont.

“Vermont ranks low because, while they have high-quality services, the level of taxation in the state is extremely high, averaging almost $8,000 annually,” says Gonzalez. “[This] is the second-largest amount in the country.”

Another state with a tarnished taxpayer ROI is California, which ranks near the bottom for safety, economy, and infrastructure.

“As the fifth-largest economy in the world, California contributes more tax dollars than any state; and people dig living here, so they put up with some government inefficiency,” says Tony Mariotti, Los Angeles real estate agent with Ruby Homes.

All in all, 73% of Americans believe the government isn’t using tax money very wisely—all the more reason to assess how various states stack up, and consider that information when deciding where to live.

States With the Worst Taxpayer ROI

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