December 2016

Spending and Taxing Go Hand in Hand

By Amy K. Frantz

States that spend less tax less. This statement seems to voice the obvious – if a state spends less it doesn’t need to take as much in taxes from its citizens.  A recent article from Kansas Policy Institute reinforces this statement once again, using data from the National Association of State Budget Officers (NASBO), the U.S. Census Bureau, and Tax Foundation.

The Kansas Policy Institute article, titled States That Spend Less Tax Less, shows that states without an income tax spend significantly less per resident that states that do have an income tax.  According to Patrick Parkes, author of the Kansas Policy article, “Income-taxing states spend 46 percent more than states without an income tax on a per resident basis.”

Table 1

Table 1

How do those states without an income tax spend less? Parkes says “the key to doing so lies in states controlling their spending and finding ways to provide those same or better quality services at better prices.”

Additionally, if we look at the ten states with the lowest tax burden vs. the ten states with the highest tax burden, the same results appear – the low tax burden states spend less per resident that the states with the high tax burden.

Table 2

Table 2

Parkes takes on critics when he states “Those who believe government should keep more of your hard-earned money contend that states like Texas and Florida can keep taxes low simply because they are blessed with unique natural resource and tourism advantages. However, these states could still have higher tax burdens if they chose to spend more.  Every state provides the same basic services (education, highways, social services, etc.), but those that do so at better prices can pass on the savings to citizens in the form of lower taxes.”

It is simple, really – if a state keeps it’s spending under control, it doesn’t have to place a higher tax burden on its citizens to pay for that spending.

Amy K. Frantz is Vice President of Public Interest Institute. 

The views expressed herein are those of the author and not necessarily those of Public Interest Institute or Tax Education Foundation.  They are brought to you in the interest of a better-informed citizenry.