I moved to Washington state in the summer of 1999. My first impressions of the state were largely positive. I liked almost everything about the area—except the traffic and transportation infrastructure. That fall, as I followed the debate over Initiative 695, my reaction was one of astonishment. “Why, the hell, would anyone want to gut funding for the state’s one serious weakness?”
But I-695 wasn’t about making the state a better place in any real sense. It was an appeal to individual greed and selfishness—a “free ice cream cones for everyone!” gimmick— that didn’t fully disclose the consequences for local government services, the ferry system, and other transportation infrastructure. My conclusion that autumn was that Washingtonians had no freaking idea how good they really have it. Subsequent observations have largely confirmed this.
In February, 2005 we learned just how good we have it government-wise. The Pew-sponsored Government Performance Project (GPP) graded Washington state a B+. From the individual scores, Washington ranked as the third best state government, with only Utah and Virginia doing better. When the report came out, we were in the midst of a contested gubernatorial election. The report seemed largely overlooked.
Last year we learned just how good we have it business-wise, when Forbes’ annual survey ranked Washington state number five in the nation for business climate. And Fortune magazine rated Washington the fourth best state in which to start a business—specifically citing our “low taxes”.
And earlier this week we learned how consistently good we have it government-wise when the 2008 GPP report was released. The 2005 results were not a fluke. Once again, Washington state ranks third behind Utah and Virginia. Our grade improved slightly to an A- overall. Individual grades were A- for money, A- for people, B+ for infrastructure, and A for information (see the full report for what these categories mean and how the grading was done).
Together these four reports strongly suggest that Washington’s government and business climate are near the top in the nation. The idea contradicts two of the three major right-wing talking points. Here’s the list:
The Washington state government performs poorly The state government hurts the business climate
- We are overtaxed for what we get out of our government
The third talking point can be decomposed into two parts. First, are Washingtonians overtaxed? And second, are tax revenues efficiently utilized by the state? The first part can be evaluated objectively by looking at the per capita tax burden for state and local taxes. Information for 2005 tax revenue (the most recent available) and state population sizes can be found at the U.S. Census Bureau. (The per capita tax burdens for all states can also be found at the Washington state Department of Revenue–either source yields the same results.)
In 2005, Washington’s state and local tax “burden” ranked at number 21, or about $3,651/person. The U.S. average was $3,447. In other words, we fell slightly on high side of average, but some $2000 below first ranked New York’s cost of $5,752/person and about $1,000 above last ranked Alabama at $2,569 per person. These figures make it difficult to argue that Washingtonians are taxed outrageously. (As a percentage income—the figure most widely cited in state by state comparisons—Washington ranks 37th, well below the national average.)
What about value? Do Washingtonians get good value for their tax dollar? Consider two hypotheses. (A) Conceivably, we could all be paying a huge premium for our state government’s third-best performance. (Sort of like the lousy fuel efficiency that high-performance cars get.) (B) Alternatively, perhaps great performing governments are also highly efficient governments.
If hypothesis (A) is correct, we might use the information to find a parsimonious set of trade-offs between government performance and per capita cost. If hypothesis (B) turns out to be correct, we can rejoice in our double dose of success—a high-performance and efficient government. And then we can strike out that third right-wing talking point.
A natural way to test between these two hypotheses is by looking at the per capita costs to achieve the grade in the GPP. Since the GPP grade is a proxy for performance, we can use state tax rates to estimate the per capita cost of that performance. Here is how I’ve done this.
For all 50 states, I took the letter grades for all four categories (one each for money, people, infrastructure, and information) and converted them into numerical scores from A = 4, A- = 3.67, B+ = 3.33, …, F = 0. I then averaged the grades to get a number between 0 and 4. This gives Washington state a grade of 3.67, which is the third best score among all states.
Next, I divided the per capita tax by the numerical grade for an estimate of the efficiency—that is, we compute the cost for each unit of grade. The resulting price per grade point is akin to the price per pound when comparison shopping among, say, different brands of apples. We can directly use the numbers to find the best value around in state government.
The results are summarized in this table:
2005 per capita tax
The “efficiency” column shows how many dollars per grade point taxpayers pay in each state. The “Efficiency rank” goes from most efficient to least efficient. The best value in state government is found in Utah, where taxpayers paid $765 per grade point.
Washington state is the 6th best value (i.e. sixth most efficient government) by this measure. It cost taxpayers just under $1,000 per grade point, compared to a national average of $1,333.
The worst? Rhode Island, where taxpayers spent $4,191 for each grade point in their score.
In the individual sub-categories, Washington state does well (results not shown in the table). We are ranked 7th most efficient for money, 7th most efficient for people, 12th most efficient for infrastructure, and 7th most efficient for information. Not too shabby!
The analysis rejects hypothesis (A) in favor of hypothesis (B). We really can rejoice in our government that is both high-performance and efficient. Right-wing talking point number three would seem to be well off the mark.
One potential criticism of this analysis is that the GPP might be strongly related to efficiency—that is, higher state scores may already reflect lower per capita taxes. If so, we should see a high correlation between per capita tax and the GPP score. We don’t. The squared correlation between the two measures is r2 = 0.034. In other words, there is only the weakest relationship between per capita tax and GPP score. Here is a scatter plot for visual confirmation:
I feel vindicated. My early impressions were right. The perpetual whiners in this state who claim that our government is broken, inefficient, poorly performing, bloated, ineffective, incompetent, and expensive are wrong—they don’t know how good they have it. They’ve hunkered down so tightly on the compound that they’ve lost touch with reality.
The facts are plain and can be evaluated objectively…Washington state is one of the greatest values around in state government. And, judging by the recent increases in both the GPP scores and the Forbes rankings, Washington is not only a great value, but has been improving.
(Cross posted at Hominid Views)