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New Yorkers pay high taxes, then told local governments should consolidate to save: Does it have to be that way?

  • / Updated:
  • Josh Durso 

Taxpayers in New York pay some of the highest rates in the U.S. But do they enjoy an equally high return on that investment?

Tax Day is April 18, and 73% of taxpayers think the government doesn’t use their taxes wisely. Paying taxes serves as an annual reminder of how much is invested in federal, state, and local governments.

Admittedly, a lot of people are unaware of what they get in return for those tax payments. As result, there’s a disconnect between taxpayers and government officials who monitor those funds.

Taxpayer return on investment, or ROI, varies based on where a person lives and pays taxes. A recent WalletHub analysis found that New York ranks near the bottom across all categories when it comes to return on investment.

WalletHub used 29 metrics to compare the quality and efficiency of state-government services across five categories – Education, Health, Safety, Economy, and Infrastructure & Pollution – taking into account the drastically different rates at which citizens are taxed in each state.

Where does New York rank in the US?

  • 41st – Overall ROI
  • 41st – Total Taxes per Capita (Population Aged 18+)
  • 13th – Education
  • 25th – Health
  • 14th – Safety
  • 40th – Economy
  • 40th – Infrastructure & Pollution

How does this happen?

Federal taxes are part of the equation, but a smaller role than the state and local taxes handed down to taxpayers. The broader question typically involves high-tax vs low-tax states. Do people in high-tax states receive superior government services? Similarly, do people in low-tax states receive low-quality services?

Mitchell Franklin, Ph.D, an Associate Professor of Accounting at the Madden School of Business, Le Moyne College, says it doesn’t break down as conventional wisdom would have it. He says high-tax states collect more revenues, but often have more ‘red tape’ around policies that make them less efficient. “They collect more, but spend it in a way that many would say is less efficient than others who have less to work with,” he explained.

Franklin adds that the most-efficient way to use tax revenue involves sticking with solutions. “Keep the politics out of it,” he continued. “Stop the red tape and policies that encourage waste and over spending. This will not be popular, but political pressure plays too much of a spending role over the best business decision an dleads to money being spent in the places that are not best for long-term growth.”

Finger Lakes Partners (Billboard)

How does it get fixed?

The solution is transparency.

While it’s easier to drive this in local and regional government, it can be a challenge to get state lawmakers to listen. One way that’s often touted by state leaders, especially in New York, is government consolidation. The argument that if taxes are already high, the only plausible solution is to merge various government entities to make them more efficient.

“I do not believe in government consolidation at local levels as many state politicians do and try to force for their own political agendas. I believe in autonomy and that taxpayers in their own village/town have final say and control as to how their village/town is run, and how their individual schools are run, and what development goes into their village where they live and pay taxes, especially as some pay very high property and school tax amounts compared to peers to live in a certain way with certain services that other areas might not offer as long as the taxpayers can afford it for their own area and willing to pay it,” Franklin added. “This is also tough to do in current economic times with increasing costs, tax bases at their limit and political pressure to consolidate.”

He says shared services are essential. This allows local governments to maintain their own identities, goals, and expectations, while working with surrounding communities to a common goal. “Towns and villages in common geographic areas have to work together to negotiate service and vendor contracts together in a manner that allows cost savings and serves the needs of taxpayers in each unique municipality,” Franklin said.