Variation in US State Government Budgets

State Similarity Index - Political Category - State Government Budgets

The State Similarity Index attempts to quantify how similar states are to each other relative to other states. The index is a statistically-based way to measure this. 20% of the index is based on politics. 10% of a state’s political score (2% of the overall State Similarity Index score) takes into consideration the state government’s budget, including taxation and spending.

(Please note that policies can change quickly, so it is best to consult legal professionals or government authorities for the most current and accurate information)

Welfare Spending

The levels of welfare spending vary across the United States. Although Alaska and New York are far different from each other, they spend the most on welfare per capita. Both states have a higher cost of living than most other states, so their governments help support their vulnerable populations. Conversely, many states in the Rocky Mountain, like Wyoming, Utah, and Colorado often rank among the lowest spenders on welfare. These states have low rates of poverty and their state governments tend to be fiscally conservative.

Source: Urban Institute

States were classified by the amount of annual spending on welfare per capita:
$1500-2000, $2000-2500, $2500-3000, $3000-3500, $3500-4000, $4000-4500

Infrastructure Spending

Alaska and North Dakota spend the most money per capita on infrastructure. Both states are major players in the energy industry. The extraction and transportation of these resources often require substantial investment in infrastructure, such as pipelines, refineries, and transportation networks. Furthermore, they are sparsely populated. For other states, spending on infrastructure may not be as important as other issues.

Source: Urban Institute

States were classified by the amount of annual spending on infrastructure per capita:
$0-500, $500-1000, $1000-1500, $1500-2000, $2000-2500, $2500-3000

Healthcare Spending

Wyoming‘s government spends the most per capita on healthcare in the country. As one of the most sparsely populates states, its remote communities have limited access to healthcare facilities. To bridge this gap, Wyoming needs allocate additional funds to ensure healthcare access for its residents. Healthcare costs in rural areas tend to be higher due to factors such as limited competition among healthcare providers, higher transportation expenses, and the need to attract medical professionals.

Source: Urban Institute

States were classified by the amount of annual spending on healthcare per capita:
$0-500, $500-1000, $1000-1500, $1500-2000, $2000-2500, $2500-3000

Education Spending

Public education per capita spending varies significantly across different states in the United States. Many states in the Northeast region such as Connecticut, Vermont, New York, and New Jersey often rank among the top spenders, emphasizing their commitment to quality education. On the other hand, Arizona and Florida rank among the lowest spenders. Since many older people retire in these states, they have relatively fewer children that need schools.

Source: Urban Institute

States were classified by the amount of annual spending on education per capita:
$1500-2000, $2000-2500, $2500-3000, $3000-3500, $3500-4000, $4000-4500

Income Taxation

Generally, states with higher average incomes and progressive tax systems tend to levy higher income taxes. States such as California, Hawaii, and New Jersey often rank among the highest in terms of income tax burden. These are also states where the Democratic Party is the quite popular. In contrast, Alaska, Florida, Nevada, New Hampshire, South Dakota, Tennessee, Texas, Washington, and Wyoming are all states that do not even have a state income tax. The Republican Party tends to be stronger in most of these states.

Source: US Census

States were classified by the rate of income taxation:
0-.5%, .5-1%, 1-1.5%, 1.5-2%, 2-2.5%, 2.5-3%

Property Taxation

Vermont has unique laws regarding property taxation to fund education. The state government determines an “equalized education property tax rate” that is applied uniformly across the state. This means that communities with higher property values will have higher tax assessments. The tax revenue collected from property taxes is then pooled at the state level and redistributed to school districts to ensure equal educational opportunities for all students in the state. Most other states have much lower property taxes on the state level.

Source: US Census

States were classified by the rate of property taxation:
0-.3%, .3-.6%, .6-.9%, .9-1.2%, 1.2-1.5%, 1.5-1.8%

Sales Taxation

Five states in the country have no sales tax: Alaska, Delaware, Montana, New Hampshire, and Oregon. Meanwhile, California and Mississippi are among the states with the highest state sales tax rates. These higher sales tax rates can be influenced by various factors, including revenue needs, budgetary priorities, and state-specific tax policies. It’s important to note that sales tax rates can vary within states due to local sales taxes imposed by cities or counties.

Source: US Census

States were classified by the rate of sales taxation:
0%, 0-2%, 2-4%, 4-6%, 6-8%, 8-10%

Business Taxation

North Dakota benefits from its booming energy sector, particularly oil production, which contributes to increased business profitability and tax revenues. Wyoming, another state with a strong energy industry, offers tax advantages and incentives to attract businesses, including low corporate income tax rates and no personal income tax. Delaware is often regarded as a corporate tax haven. It attracts many businesses due to its favorable business entity laws, such as the availability of favorable tax treatment for certain types of businesses. Alaska, with its natural resources and oil industry, benefits from revenue generated through taxes on oil production, which helps support a business-friendly environment.

Source: US Census

States were classified by the rate of business taxation:
0-.25%, .25-.5%, .5-1%, 1-1.5%, 1.5-2.5%, 2.5-3.5%

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