WalletHub Study: New Jersey Is 2024’s State with the 9th Worst Taxpayer ROI

Some thoughts on Taxpayer Return on Investment:

Do states with high tax burdens provide better government services?

“We have all heard the cliché, ‘You get what you pay for.’ States that raise more revenues (which some describe as high tax burdens) can provide more and better services. That being said, it is important to ensure the revenues are being spent wisely, for the purpose identified in the budget. In the words of Joel Slemrod, a prominent economist, ‘When the government spends one dollar in tax revenues, it better produce value worth more than one dollar.’ …In addition to raising adequate revenues, the tax burden should be fair, meaning those least able to pay should not bear a higher tax burden given that ability. The state and local taxes in almost all states are regressive, meaning the burden increases as the taxpayer’s available wealth and resources shrink. This is per se unfair.”
Susan Pace Hamill – Professor, University of Alabama School of Law

“The connection between taxation and the quality of government services is intricate and influenced by various factors. High-tax states may have more funds available for public services, which can potentially lead to better quality services in areas such as education and healthcare. However, efficient management of these funds is crucial, and some high-tax states may struggle due to issues like corruption or mismanagement. On the other hand, low-tax states may have limited resources for public services, which can have a negative impact on quality. However, lower taxes might attract economic activity, thereby helping the state in other ways. Overall, the relationship between taxation and government service quality is complex, and factors like governance and efficiency also play important roles. For accurate conclusions, it is necessary to analyze specific cases.”
Heejung Park, Ph.D. – Assistant Professor, Northern Michigan University

How can state and local governments use tax revenue more efficiently?

“Open transparency in the budget as to exactly what the revenues are being spent for and the goals to be achieved combined with rigorous scrutiny to ensure the revenues are being spent in that fashion and the goals are reasonably being achieved is the best way to foster accountability and minimize government waste. For example, assume property taxes are raised to increase public school funding for a low-income area with a stated goal of enhancing student performance. Prominent experts in education and education funding identify key strategies to further this goal, for example, hiring better and more teachers so that the students can benefit from a lower student/teacher ratio. If the revenues are used, for example, to construct a new athletic complex, that would be inconsistent with the stated goal.”
Susan Pace Hamill – Professor, University of Alabama School of Law

“Efficiently utilizing tax revenue is crucial to providing high-quality public services and promoting economic development..Firstly, invest in Technology and Innovation. Investing in technology can streamline administrative processes and reduce associated costs. Exploring innovative solutions can enhance service delivery, such as digital platforms for public services. Secondly, opt for Collaboration and Shared Services. Collaborating with neighboring jurisdictions to share resources can reduce duplicated services and costs. Pooling resources for joint projects can reduce overall costs and increase efficiency. Thirdly, engage with the Community. Involving the community in decision-making processes can ensure that spending aligns with community needs. Gathering feedback on public services can help to make informed adjustments and improvements.”
Heejung Park, Ph.D. – Assistant Professor, Northern Michigan University

How can everyday citizens assess the ROI of their local tax dollars?

“Every day citizens should spend the time and energy to become informed when they vote in state and local elections. The quality (or lack of quality) of the political leaders elected directly reflects the citizens electing them. Every day citizens should insist on transparency as far as government spending. Information about the use of government resources should be easily available on the Internet. For example, the use of state planes and automobiles should be documented (who is using them for what purpose), and such information should be posted on the Internet. That would help discourage politicians from using these resources for personal purposes, which is per se government waste.”
Susan Pace Hamill – Professor, University of Alabama School of Law

“Assessing the Return on Investment (ROI) of local tax dollars is crucial in understanding how tax revenue is being utilized to benefit the community…Primarily, it is essential to understand the budget. Start by reviewing the local government’s budget to gain a clear picture of how tax dollars are allocated across different departments and services. Second, access financial reports. Obtain and review financial reports published by the local government to track revenues, expenditures, and overall financial health. While doing so, look for transparency in financial reporting, including breakdowns of spending on key services. Third, engage with local officials. Communicate with local elected officials and government representatives to seek clarification on budgetary decisions and spending priorities. Request information on specific projects and their intended benefits for the community.”
Heejung Park, Ph.D. – Assistant Professor, Northern Michigan University