Skip to Content

5 States Where Your Tax Dollars Go the Furthest

Tax reform is now dominating headlines as President Trump and Republicans in Congress turn their attention from their failed Obamacare repeal to overhauling the tax code.

Not surprisingly, most Americans think their federal income taxes are too high. But your own viewpoint is probably heavily skewed by where you live in the country.

While the federal tax code is uniform across the nation, state and local taxes vary widely. Seven states boast no personal income tax at all: Alaska, Florida, Nevada, South Dakota, Texas, Washington, and Wyoming.

WalletHub is out with a new report Tuesday, ranking states by where taxpayers get the most bang for their buck when it comes to state and local taxes.

The question: Do people in high-tax states benefit from superior government services, whereas citizens of low-tax states suffer from lower-quality public schools, crumbling roads and bridges and higher crime rates?

The answer isn’t clear cut. WalletHub scored the quality of government services in each state by looking at 23 metrics across five categories: education, health, safety, economy, and infrastructure and pollution.

Here are the five states where taxpayers get the highest ROI—or return on investment—from their taxes, according to WalletHub.

New Hampshire

While the Granite State doesn’t tax wages, it does tax income from dividends and interest at 5%. It also has no state sales tax. Taking all of this into account, WalletHub found New Hampshire residents have the second-lowest tax bills after Alaskans, averaging just $2,364 per capita.

But even though taxes are so low, residents benefit from strong measures of public wellbeing. New Hampshire boasts the lowest rates of poverty, unemployment, and infant mortality in the nation. Violent crime and property crime are also low, as is the number of fatalities in auto accidents.

South Dakota

Residents of the Mount Rushmore State pay no state income tax on their wages, but state and local jurisdictions have other ways of collecting revenue. South Dakota levies a 4% sales tax, for example, and property taxes average about 4.4%.

Overall, South Dakotans pay an average of $2,634 per capita in state and local taxes. WalletHub said the state scored high on measures of health and infrastructure and pollution. The state has the highest number of hospital beds per 1,000 residents, a very low unemployment rate at just 2.8%, and low levels of air pollution.

Florida

The Sunshine State is at best, mediocre in terms of government services. It scored high for quality of roads and bridges, but otherwise was middle-of-the road on health and public education.

Still, Florida is near the top for ROI, mainly because taxes there are low. The state doesn’t tax wages, and property taxes average 3.5%, while sales tax is 6%. Overall, WalletHub estimates state and local taxes average $2,385 per person.

Virginia

WalletHub ranked the Old Dominion among the top 10 states for public education and safety. State and local taxes average $3,213 per person.

Alaska

The Last Frontier ranks near the bottom on WalletHub’s measures of health, safety and education—but overall boasts the lowest state and local taxes in the country. Alaskans pay only $1,584 per person in state and local taxes, the report finds.