(SM Chavey, Liberty Headlines) According to data from a recent study, Republican-led states tend not only to have lighter tax burdens, but they’re fiscally healthier as well.
The study came from the Mercatus Center, a research center at George Mason University that is “dedicated to bridging the gap between academic research and public policy problems,” according to its website.
The Mercatus report did not discuss the political standing of each state, but an Investor’s Business Daily article did. And it found that of the 10 states that were ranked highest in solvency, only the 10th has a Democratic governor.
Using the states’ own audited financial reports, the study looked at five aspects: cash solvency, budget solvency, long-run solvency, service-level solvency, and trust fund solvency.
- Cash solvency looked at short term cash on hand.
- Budget solvency questioned if there was a budget shortfall in the fiscal year.
- Long-run solvency judged whether or not the state could meet long-term spending commitments.
- Service-level solvency asked how much “fiscal slack” a state had in case citizens demanded more services.
- Finally, trust fund solvency looked into each state’s unfunded pension and healthcare liabilities.
The results were then averaged, so the top states had to have decent scores in all five categories.
Of the top 25 states, all but four are primarily Republican-led. Twenty of the bottom 25 states are solidly Democratic.
Florida, North Dakota, South Dakota, Utah, and Wyoming topped the overall list. According to the report, they consistently had little debt, lots of cash, and low short-term debt obligations.
Even these states, however, struggled with pension and health care. Some rely on unpredictable revenue sources — oil and gas. Declining oil prices knocked Alaska out of the top five and bumped Wyoming from third last year to fifth this year.
In last place was New Jersey, followed by Illinois, Massachusetts, Kentucky, and Maryland. Each of these states had high debts, not much cash, and large liabilities.
The bottom five states struggled with pensions and healthcare benefits even more. According to the report, “each holds tens, if not hundreds, of billions of dollars in unfunded liabilities — constituting a significant risk to taxpayers in both the short and long term.”
This is the fourth year of the report. While most of the states remained within five spots of where they were last year, six states (Alaska, Colorado, Louisiana, New Mexico, Pennsylvania, and Texas) saw substantial drops in fiscal performance and seven (Arkansas, Connecticut, Delaware, Hawaii, Maine, North Carolina, and Oregon) saw significant improvement.
It doesn’t look like states can tax their way to fiscal solvency, either. According to data from the Tax Foundation’s 2017 report, the 10 most fiscally sound states have only an 8.5 percent average tax burden, while the lowest 10 states averaged almost two percent higher, 10.2 percent.
Four of the nine states that raised taxes this year are in the bottom 10. None are in the top.
“The bottom line is that the more money the state government takes from taxpayers, the worse it handles it,” the Investor’s article said.