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These states get the most out of taxpayer dollars

Aarthi Swaminathan
Finance Writer

If taxpayer dollars are seen as an investment into the state, New Hampshire residents are getting the best return.

The New England state came in first in a new WalletHub study that looked at which of the 50 gave taxpayers the biggest return on their investment (ROI).

ROI was measured by examining state and local tax collections across 50 states, as well as the quality of six types of services — education, health, infrastructure & pollution, safety, and economy.

"It was surprising that the top ten states include both no-income tax options and relatively high-tax states,” WalletHub analyst Jill Gonzalez told Yahoo Finance. “It's not just one or the other. Florida contends with Colorado in this report."

The states that give taxpayers the best return on their investment are generally those with lower taxes, but still offer high-quality services. (Graphic: David Foster for Yahoo Finance, Data: WalletHub)

Low taxes, great services

One reason why New Hampshire clinched the top spot was indeed because of low taxes. The state doesn’t tax an individual’s earned income — meaning that your W-2 doesn’t incur a tax at all, but residents do face a 5% tax rate on income from dividends and interest.

Other low-tax states like Florida and Texas — which also happens to be the best state to do business — are also on the top 10 list.

Gonzalez added that despite New Hampshire residents paying the second lowest taxes in America — at $2,300 — they also “benefit from quality government services. The state is safe, it has high quality health care services and a strong economy. In short, New Hampshire residents get the most bang for their buck."

"For the most part, lower tax states have a better ROI,” said Gonzalez. “[But] there are exceptions, like Utah or Wisconsin, but, in general, states that pay lower taxes and benefit from good quality government services have a higher ROI."

The median household income in New Hampshire was $71,305, according to the U.S. Census Bureau.

U.S. Department of the Treasury Internal Revenue Service (IRS) 1040 Individual Income Tax forms for the 2018 tax year are arranged for a photograph in Tiskilwa, Illinois, U.S., on Monday, March 11, 2019. (Photo credit: Daniel Acker/Bloomberg via Getty Images)

No alohas for you

Hawaii came in dead last on the ROI list, despite being the happiest state in America.

The Aloha State has progressive income taxes and low property rates, but the key metrics that the state failed to clear were education, infrastructure, and pollution metrics.

Education as a metric refers to considerations like the quality of the public school system, projected high school graduation rate and so on, and infrastructure and pollution would refer to things like quality of roads and the average commute time.

Hawaii also happened to be ranked the least favorable place to do business, according to a September 2018 WalletHub analysis.

The median household income in Hawaii was $74,923, according to the U.S. Census Bureau.

Part of a security details keeps watch behind a house overlooking the beach at Kailua Bay not far from where first lady Michelle Obama and her daughters are staying in Kailua, Hawai, Thursday, Dec. 22, 2011. (Photo credit: AP/Eric Risberg)

Paying their dues

States which have traditionally imposed hefty taxes on their residents — like California and New York — appear at the bottom of the list.

And those states are also the primary beneficiaries of one taxpaying group in particular — immigrants.

California’s immigrants were found in a separate survey to have contributed the most to the state, as compared to immigrants in other states. New York was second, followed by New Jersey.

Not only did the immigrants in those states pay taxes, they also bought property and created businesses — overall adding to the economy.

Aarthi is a writer for Yahoo Finance. Follow her on Twitter @aarthiswami.

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