Would you rather pay low taxes or be happy?

The AARP latest news page has a list of the five happiest states.  Minnesota is number one.  Minnesota is also among the higher taxed states.

Justice Oliver Wendell Holmes supposedly said, “I like taxes; they buy me civilization.”

The other four states are Utah, Hawaii California, and Nebraska.  The full list is at https://wallethub.com/edu/happiest-states/6959/.  I’ll let you draw your own conclusions about the rankings.  This site also has the best and worst rankings for a few more categories; taxes were not among them.

World Getting Better? Depends

I finally finished Charles Kenny's "Getting Better: Why Global Development Is Succeeding – And How We Can Improve the World Even More".  We bought the book when he spoke at the "Confronting Global Poverty" lecture Series of the Alworth Center for Peace and Justice at St. Scholastica in Duluth on Nov. 13, 2012.  You can watch his lecture here.

Many were disappointed in his talk and book because they thought he was painting a rosier picture than reality.  Kenny's thesis is that we should concern ourselves less with increasing GDP and look more at quality of life measures.

These include health, longevity, education, child mortality, and family size.  He claims that throughout the world with a couple of notorious exceptions, the first four measures are getting greater and the last less.  Rather than look at the number of roads and dams, we should look at how people are living day-to-day and what they and we can do to improve daily life.

For an example of a low-tech solution that improved the lives of trash pickers in India, see "Out of India's Trash Heaps, More Than a Shred of Dignity", Sarika Bansal, New York Times, 2013-06-12 .  Do read some of the comments.

The fallacy of ranking states by "tax burden"

It is quite the fashion to rank states by "tax burden" or how "business-friendly" they are. But are these the only criteria for determining where to live or headquarter a business?

CNN published several lists of the Fortune 500, and with a bit of wandering I found the number of Fortune 500 headquartered in each state. I used the "Pick a state" section of "Fortune 500 2011: States: California Companies".

I found tax rankings at "The Tax Foundation - Facts and Figures Handbook: How Does Your State Compare?".

I put this data in a spreadsheet and tried to figure out a correlation. I found this difficult because there is such a wide discrepancy between corporate headquarters and "low tax" states. For example, the Tax Foundation ranks New York third in "tax burden" but it has the headquarters of 57 of the Fortune 500 companies, and Texas is ranked 32nd with 51 companies. The external factors could be that New York is the "financial capital" of the U.S. and that Texas has the most oil and related companies.

I finally sorted them by "tax burden" and then summed the number of Fortune 500 companies per state for groups of 10. Starting with the "worst ten tax states", the totals were 208, 79, 96, 93, and 20.

Other external factors could include that Arkansas has four Fortune 500 companies because Sam Walton lived in Arkansas and the other three companies have a lot of business with Wal-Mart. I don't know. Or what influence do physical geography, economic geography (like rural vs. urban), social environment (cosmopolitan vs. distrust of "outsiders"), and historical factors have. It would take a few volumes to figure all of this out.

Oh, yes, how about a high "tax burden" making a state a better place to live - parks, schools, excellent infra-structure, transparent government, and on and on?

But the "bottom line" is that "tax burden" is only one factor of many in determining the success of businesses and the quality of life in any give state.

High and low tax states: All things considered, which is better?

Yahoo Finance often has articles about the taxation as a gauge of where to live, whether a place to work or a place to retire to. The latest was "The Most and Least Taxing States to Live and Retire In", Joel Stonington, Bloomberg, 2011-10-09.
http://finance.yahoo.com/retirement/article/113611/most-least-taxing-states-bloomberg

Many early commenters said they'd much rather live in the high tax states than the low tax states because the quality of life was better.

Articles like these never tout up the benefits received, better educated work force, better roads, better fire service, better police, better courts,… In other words, you get what you pay for.

Would you choose a hotel strictly on price? Gosh, for $10/night, you can get a tiny room with bedbugs, dirty sheets, broken springs, noisy neighbors, and no heat or air-conditioning. Or for $100/night you could get a spacious room with clean sheets, quiet neighbors, heat or air conditioning, and a "free" all-you-can eat breakfast.

Taxes are not the only consideration for picking a retirement destination

Or picking any other place to move to.

Yahoo Finance republished a Kiplinger article, "5 Tax Factors to Consider When Picking a Retirement Destination", Mary Beth Franklin, 2010-10-06.

I added the following comment to the article.

Beware of isolating tax factors from all other considerations.  Maybe you'll pay less taxes in the State of Bliss but less taxes could mean slower response times by fire departments.  Slower response times may mean higher insurance costs.  Less taxes could mean less road repair.  Less road repair could mean more auto repair costs.  Less taxes could mean less regulatory oversight.  Less regulatory oversight could mean higher electricity costs.  This could mean you pay more for air-conditioning in your retirement home than you paid for heating in your previous home.

Tax factors are only one part of the two really important considerations: the cost of living and the quality of life.  Look at the big picture.

Lowest taxes or best quality of life

Yahoo! Finance had an item on the lowest tax states for retirees.  The more direct link to the article is "The Lowest Tax States for Retirees", Kimberly Palmer, U.S. News, 2010-03-29.

Are low taxes all there are to life?  What about the services that taxes buy?

Will there be enough well-educated health-care workers to care for these low-tax retirees as they get even older?  Not if there are not enough taxes to educate children well enough to become health-care workers.

Will there be good, safe roads for them to drive to the golf course?  Not if there are not enough taxes to keep the roads in good repair.

Will there be enough good clean water for drinking and cooking?  Not if there are not enough taxes to build the infra-structure to bring the water long distances.

And seniors have to get rid of water more frequently than younger people.  Will there be enough clean, safe rest stops as they travel.  Not if there not enough taxes to maintain rest stops.  A low tax state like Arizona is closing rest stops.

Americans love to point out how much higher taxes are in many European countries, especially the Scandinavian countries.  What they ignore is that these countries consistently come out higher on measures of quality of life.

U.S. News also has a page "Find the Best Place to Retire" with a long list of choices.  My choices of size of city, weather, health care, and activities gave cities in Minnesota, Michigan, and Vermont.  Vermont is considered by U.S. News one of the worst tax states, and many think that Minnesota and Michigan are among the worst.  For my money, I'm getting what I pay for.