Worst State Tax Investments

State and local taxes vary widely across the country and more than half of Americans feel they pay too much. Unfortunately, most people also believe that roughly half of their tax dollars are being wasted.

So how well does your state spend your tax dollars?

Some states do a far better job of investing taxpayers’ money into government services that will benefit residents. Others provide a poor return on investment (ROI), according to WalletHub’s taxpayer ROI study.

Although federal tax rates are uniform across the country, the state tax burdens differ greatly. WalletHub wondered if people in high-tax states benefit from correspondingly superior government services or if low-tax states were simply more efficient.

According to the results of the study, there is not much of a correlation better state and local tax rates and the quality of government services being funded. In order to analyze the data, WalletHub separate services into 6 main categories: infrastructure, education, health, safety, economy, and pollution.

According to WalletHub’s report, taxpayers in blue states earned an average rank of 24.74, which beats out the 27.29 of red states. (States were designated based on how they voted in the last presidential election.)

(Top income tax rates from The Tax Foundation.)

10. Kentucky

Tax rate rank: 30

Top income tax rate: 6%

Government services rank: 41

Louisville

While Kentucky’s government services fall mostly in the middle of the pack (infrastructure ranked 22 and safety ranked 28), it ranked poorly for its economy and pollution (ranked 42 and 36, respectively). The state was among the states with the lowest home price volatility, though, which is likely a relief for residents.

9. Alabama

Tax rate rank: 12

Top income tax rate: 5%

Government services rank: 48

Mobile

Alabama may have the lowest tax rate rank in the top 10, but residents aren’t getting much for the money they pay the government. The state tied for 48 for the worst hospital systems and its health received the same rank for overall health, plus Alabama has one of the worst education ranks in the country (45).

8. (tied) California

Tax rate rank: 50

Top income tax rate: 13.3%

Government services rank: 38

Sausalito

California has the opposite problem of most of the states on this list. While the government services rank isn’t among the worst in the nation, that mediocre ranking comes at the cost of the second-worst tax rate rank, according to WalletHub. Only New York received a worse tax rate rank, but at least its government services ranked 25 overall.

The Golden State has the worst pollution in the country (51), nearly the worst infrastructure (49), and one of the economies (44). While its safety rank falls in the middle (25), at least California is doing well with its health and education rankings (4 and 9, respectively).

8. (tied) Tennessee

Tax rate rank: 25

Top income tax rate: 6% (flat rate)

Government services rank: 45

Knoxville

Infrastructure and education (23 and 20, respectively) did fairly well in Tennessee, but perhaps that is where all the taxpayers’ money is going. The state has the fourth-worst health and safety rankings, plus its pollution is among the worst (43). Tennessee ranked 47 for health systems and 50 for the rate of violent crimes, according to WalletHub.

6. West Virginia

Tax rate rank: 18

Top income tax rate: 6.5%

Government services rank: 47

Charleston

West Virginia received the best rank for water quality, and it has one of the lowest tax rate ranks in the top 10, but the state has the second-worst infrastructure in the country and the worst health rank in the country. Plus, its education ranked 46.

5. North Carolina

Tax rate rank: 35

Top income tax rate: 5.8% (flat rate)

Government services rank: 43

Chapel Hill

North Carolina’s economy and pollution ranks were among the worst in the country and the state ranked 39 for water quality (data was not available for 8 states). Meanwhile, South Carolina had one of the best water quality ranks in the country. North Carolina’s safety was in the middle of the pack (25), as was its health and education.

4. District of Columbia

Tax rate rank: 37

Top income tax rate: 8.95%

Government services rank: 44

Dupont Circle

The nation’s capital is the only entry on this list to come even remotely close to California’s incredibly high 13.3% top income tax rate. DC’s has the second-worst pollution in the country, and one of the worst health rankings. According to WalletHub, DC tied with Alabama for the 48th worst hospital system, was ranked as having the highest violent crime rate, and has the worst roads and bridges in the country.

3. Louisiana

Tax rate rank: 17

Top income tax rate: 6%

Government services rank: 49

Shreveport

Louisiana has one of the worst education rankings in the country with the second-worst school systems, according to WalletHub. Plus, the state performed poorly for infrastructure, health, and safety. Its economy and pollution were in the middle of the pack.

2. Mississippi

Tax rate rank: 15

Top income tax rate: 5%

Government services rank: 51

Meridian

A 5% top income tax rate won’t be much consolation considering Mississippi has the worst government services rank. However, the state has the third-worst education, the worst economy, and one of the worst health rankings. The only decent ranking Mississippi received was landing at 24 for safety.

1. Arkansas

Tax rate rank: 31

Top income tax rate: 7%

Government services rank: 50

Jonesboro. Photo by Thomas R Machnitzki

Arkansas’ government services may be slightly better than Mississippi’s, but Arkansas ranked much worse for its tax rate. For their higher than average taxes, residents have the third-worst safety. Plus, its health and economy were among the worst in the country.