With Tax Day coming up on April 15 and 66% of Americans thinking their current tax rate is too high, WalletHub today released its report on the states with the Best & Worst Taxpayer Return on Investment in 2025, as well as expert commentary.
WalletHub used 29 metrics to compare the quality and efficiency of state-government services across five categories — Education, Health, Safety, Economy, and Infrastructure & Pollution — taking into account the drastically different rates at which citizens are taxed in each state.
| States with Best Taxpayer ROI | States with Worst Taxpayer ROI |
| 1. New Hampshire | 41. Arkansas |
| 2. Florida | 42. Nevada |
| 3. South Dakota | 43. Oregon |
| 4. Missouri | 44. New York |
| 5. Ohio | 45. Delaware |
| 6. Wisconsin | 46. North Dakota |
| 7. Nebraska | 47. California |
| 8. Rhode Island | 48. Alaska |
| 9. Iowa | 49. Hawaii |
| 10. Virginia | 50. New Mexico |
Best vs. Worst
- Red States have a higher taxpayer return on investment, with an average ranking of 21.77, compared with 31.58 for Blue States (1 = Best).
- Alabama has the lowest proportion of major roads in poor or mediocre condition, which is 7.4 times lower than in Rhode Island, the state with the highest.
- Maine has the fewest violent crimes per 1,000 residents, which is 7.3 times lower than in New Mexico, the state with the most.
- Massachusetts has the lowest infant mortality rate per 1,000 live births, which is 2.8 times lower than in Mississippi, the state with the highest.
To view the full report and your state’s rank, please visit:
https://wallethub.com/edu/
“There can be a tradeoff between how much tax you pay and what you receive in return from the government. Several of the states with the best taxpayer ROI don’t charge any income tax, and residents pay less at tax time while receiving good-quality (though not necessarily the best) government services. At the same time, while people pay more in states that do charge income tax, they may benefit from better infrastructure, education, safety or public health as a result.”
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“New Hampshire is the state with the best taxpayer return on investment, which is due in large part to the fact that it has no income tax. The Granite State’s tax resources have had a good impact on crime prevention and the environment, as the state has the lowest crime rate and the second-lowest air pollution in the country. It has one of the best public school systems as well.”
- Chip Lupo, WalletHub Analyst
Expert Commentary
How can everyday citizens assess the ROI of their local tax dollars?
“ROI will have different meaning to different residents, depending on their own individual circumstances (age, income, family, health, etc)... Education, transportation, public safety, recreational facilities, etc. are all important municipal services. Higher property tax rates are often required in order to provide sufficient funding for these services. On the other hand, a municipality with a lower tax rate may be more reliant on state funding and have fewer or lesser quality services. Comparing tax rates, quality and funding of services, and average property value among municipalities within a certain geographic location can provide helpful insight for assessing ROI in a particular city or town… Consider what services the municipality aims to increase its budget allocations. Are they necessary or justifiable? Or are they at the expense of other important underfunded services?... A comparison between a municipality’s budgeted amounts versus its actual spending can give insight into budgeting efficiency. The best way for citizens to address concerns they may have about municipal budgeting and ROI is to stay informed and participate in the municipal budgeting process. Citizens can attend Board of Selectmen meetings, Board of Education meetings, Board of Finance meetings, hearings, etc.”
Lauren E. Haddad Washburn, Esq. LL.M. - Tax Attorney; Adjunct Professor, Bryant University
“Everyday citizens can assess the return on investment of their tax dollars by examining how efficiently their local and state governments convert revenue into high-quality public services. One of the most practical approaches is to analyze local and state budgets, which are often available online through government websites. Budget documents provide insights into where tax revenue comes from and how it is allocated across different public service categories. Citizens can compare per capita government spending in key areas such as education, healthcare, transportation, and public safety with similar cities, counties, and states. However, spending alone does not tell the full story – service quality indicators are equally important. For instance, when assessing education spending, it is not enough to look at spending per pupil; one should also examine performance metrics such as graduation rates, standardized test scores, and post-secondary enrollment rates. Similarly, in healthcare, comparing state spending on Medicaid should be accompanied by an evaluation of health outcomes, such as infant mortality rates, life expectancy, and access to healthcare services. The same principle applies to transportation funding, where residents can look at road conditions, public transit accessibility, and infrastructure quality rather than just raw spending figures. In all, efficiency is not simply about spending less; it is about spending wisely to achieve the best possible outcomes. A well-functioning government should balance cost-effectiveness, high-quality services, and long-term fiscal sustainability. For taxpayers, assessing the efficiency and effectiveness of public spending provides a clearer picture of whether they are getting good value for their tax dollars.”
Min Su, Ph.D. – Associate Professor, Louisiana State University
What's the most common way local governments waste taxpayer dollars?
“State and local governments have wasted precious taxpayer resources on targeted corporate and industry handouts. Those handouts can take the form of cash subsidies, tax credits, or, say, property tax abatements. Decades of independent, academic and other scholarship show such efforts to be ineffective and expensive. One 2019 study collected 2,400 incentive deals across 35 states and compared firms that received incentives to like firms that had not. The authors reported a ‘starkly negative’ employment impact at firms that were subsidized. In other words, unsubsidized firms did better. I performed a similar study with business economist and Ball State University professor Michael Hicks in 2020. We looked at 2,300 incentive deals cut by just the state of Michigan going back to 1983. These incentives ran the gamut, across nine program or program areas. We found no impact in five areas, and one that was explicitly negative. In three programs we found job creation ‘success’ but it came at a huge cost. For instance, the state’s primary business tax credit incentive program created jobs, but at a cost of $125,000 in incentives offered per year per job. That’s a huge net negative for the Michigan taxpayer. Michigan has wasted billions and billions of dollars on such programs. That money could have been used much more efficiently and productively by funding true public goods – like more and better-quality roads and bridges – or by simply cutting taxes across-the-board for all citizens, instead of a favored few.”
Michael D. LaFaive – Senior Director of the Morey Fiscal Policy Initiative, Mackinac Center for Public Policy
Do states with high tax burdens provide better government services?
“The relationship between tax burdens and government services is a topic of ongoing debate. In general, states with higher tax burdens tend to provide more public services because governments have greater revenue to allocate towards education, healthcare, public safety, and infrastructure. A state’s tax burden – measured as total state and local taxes, including property taxes, individual income taxes, and sales and excise taxes, as a percentage of personal income – determines the extent to which governments can fund and sustain essential public services… states with higher tax burdens often rank at the top of government spending in areas like education, healthcare, and public welfare… This positive correlation between taxation and spending is not surprising – greater tax revenue provides governments with the financial means to offer more public services… Some states manage to maintain high levels of public spending while keeping tax burdens relatively low due to alternative revenue sources. Alaska is a prime example. The state levies no individual income tax or statewide sales tax, yet it ranks among the highest in per capita public spending. This is possible because Alaska generates a substantial portion of its revenue from oil production and natural resource royalties… Higher public spending does not always translate into better service quality. Several factors determine how effectively a state uses its tax dollars. Geography and population density play a significant role. In states with large land areas but low populations – such as Alaska, North Dakota, and Wyoming – delivering public services such as healthcare, education, public safety, and waste management is inherently less efficient because these services must be provided to small, widely dispersed communities… Moreover, rural areas require longer stretches of roads, expanded utility networks, and decentralized public services, all of which add to infrastructure costs and workforce expenses… The cost of living also plays a significant role in government spending per capita. States such as California, New York, and Massachusetts have higher public employee wages, contractor costs, and operational expenses, which increase government spending even when service levels are similar to lower-cost states.”
Min Su, Ph.D. – Associate Professor, Louisiana State University
2025 Tax Resources From WalletHub
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