Are citizens of highly taxed states better served?

 Back on 2/26, in response to concerns about how to address the deficit, I posted this question by email:

If the correct answer was simply "raise taxes", then the states with the highest total tax rates would be best off, right?

I followed up with links to various unbiased sources on the web.  I avoided sites with political axes to grind and generally stuck to sources that presented data from governmental organizations (e.g.  I was shocked at how small (20%) the load of Federal Personal Income Tax actually is!  All the noise we here in the Media led me to believe this tax was, by far, the major tax load on the economy.  The FICA taxes (Social Security plus Medicare) are another 18% or so.  The BULK of the taxes are State and Local, including income, property, sales and many various fees and charges against  business.  We hear LITTLE about these in the national press because they impact us primarily in terms of higher prices for goods and services.

I tried to get a good listing of which are the "most taxed" (combining all taxes) states in the union, so that I could at least get a ranking, and begin to think about an answer to my question.  Unfortunately, it was very difficult to find information that was timely and correct.  I expanded my search to sites possibly "less" unbiased, and still found problems due to the complexity of the tax system.  For example, most of the rankings I found were obviously wrong due to taxes on things "exported" from the state.  A brochure from the Tax Foundation listed Alaska as having the highest per capita tax, yet it is well know that each citizen of that state receives thousands of dollars FROM the state in terms of oil revenues.  Obviously, the tax on the Oil Industry was factored into the computation resulting in a huge tax bill that the citizens of Alaska themselves never pay directly. (I admit, however, we all end up paying a share of that tax when we buy gas at the pump!)

The Tax Foundation has recently updated their site to better address this.  They’ve also added a neat, interactive map by which you can easily check on your state.  Check it out.

Which are the "most taxed" states?  CT, NJ, NY, CA, MD  …are you guys happy with your government services?

Which are the "least taxed" states?  Alaska, Mississippi, Louisiana, South Dakota 

I still don’t have an answer as to where the citizens think they are "better served", though I personally believe the citizens of the "least taxed" states are at probably more likely to be "getting their money’s worth!"  I personally believe that NO system can work efficiently without competition to test it in an open and fair marketplace, and thus NO government can efficiently spend our money.

But THAT may change!   …if we continue to PUBLICIZE the difference in taxation and services between states, people COULD migrate, i.e. vote with their feet, converting the country into a "market" of sorts in which the original question can be answered.

I’ll leave it for you to decide based on where you live and your experience with the services your state and local government provides.

Note:  One thing that confuses and "cost / benefit" analysis is that, in modern times, the states receive money from the federal government.  For example, Mississippi is the next to cheapest state in terms of taxation, but its benefits are probably much better than that would suggest because it is the MOST advantaged state in terms of tax revenues sent to it from the federal government.  It is not clear if this is a "Katrina thing" (i.e. a temporary distortion) or reflective of poverty in the "delta" counties in the north part of the state.


Talking about The Tax Foundation – Tax Research Areas > State Tax Policy and Data
State Tax Policy and DataThe Tax Foundation’s Center for State Fiscal Policy educates taxpayers about sound state fiscal policy and the size of the tax burden borne by Americans at the state and local level. We do this by producing, distributing, and marketing meaningful data and principled analysis that influences the debate at the state and local level toward pro-growth tax policies.

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