What are the hallmarks of a well-run state? It turns out that one of the best indicators of a state’s fiscal stability is how low their tax rate is.
A new ranking by George Mason University shows that the most fiscally-sound states in the country have some of the lowest tax rates.
By contrast, the most fiscally dubious states – the ones teetering on a fiscal precipice – have suffocating taxes that soak their residents.
The fourth annual “Ranking the States by Fiscal Condition,” released Tuesday morning, covers five measures that are intended to gauge a state’s ability to pay bills, avoid deficits, and meet long-term spending needs – like pension liabilities. Investor’s Business Daily has the details:
Cash solvency, for example, measures a state’s ability to pay immediate bills. Budget solvency focuses on whether states will end the year with a surplus or deficit. Service-level solvency gauges a state’s ability to meet a demand for increased spending. Long-run solvency looks at a state’s ability to meet longer-term spending commitments. Trust-fund solvency looks at the states’ unfunded pension liabilities and state debt.
So what are the ten best-run states, according to George Mason University? Here they are – all Republican-controlled states:
- North Dakota
- South Dakota
Montana has a Democratic governor, but a Republican legislature.
Of the ten worst-run states. Six of them are run by Democrats (at least in the legislature). Leading the pack is Chris Christie’s own state of New Jersey. Here they are:
- 50. New Jersey
- 49. Illinois
- 48. Massachusetts
- 47. Kentucky (a Republican State)
- 46. Maryland
- 45. Pennsylvania (Republican Legislature)
- 44. Louisiana (Republican State)
- 43. California
- 42. West Virginia (GOP State)
- 41. New Mexico.
The report doesn’t include data on the states’ political leanings or tax burdens, but the implication is clear.
Of the 25 most-solvent states, all but four are solidly Republican. Of the bottom 25 states, all but five are solidly Democratic.
The most fiscally sound states also tend to have the lowest tax burdens, according to a separate analysis by the Tax Foundation, which measures state and local tax burdens as a percentage of state income.
Of the ten most fiscally sound states, the average state tax burden is 8.5 percent. Of the ten least-solvent states, it’s 10.2 percent.
This should serve as a warning to anyone considering electing Democrats or raising taxes.