Taxes have been in the news a lot lately. The prevailing wisdom that underscores these discussions seems always to be that high taxes are bad, low taxes are good. So by extension, a world with zero taxes would be a perfect world, right?
I would like to challenge that assumption. The question that should be asked instead is “What benefits are we getting for our taxes, and are the benefits worth the cost?” We can’t know if our taxes are too high or too low unless we know what we need to buy with them. Taxes provide the working capital that federal, state, and local governments use to provide the benefits that their citizens expect.
One of the things that our taxes should provide is a healthy populace, which should be reflected in the life expectancy of its citizens. And fortunately, mortality is something that is easy to measure. We have been running a set of economic experiments in our states for decades, and the outcomes should be discernible. If low taxes are better than high taxes, then that should be clearly articulated in the life expectancy data.
In fact, the opposite is the case, and the trend is unmistakable. The chart below plots life expectancy by state for the year 2013-14 against the total taxes (federal, state, and local) paid by its citizens. The tax year 2015 was chosen since those data were easily accessible. A trend line (linear regression) is also shown, which represents the best straight line that can be fit to these data. The raw data that I used are also shown in the table below. Federal, state, and local tax data for 2015 were obtained from sites here and here. Life expectancy data were obtained here.
It is particularly revealing to also distinguish the political affiliation of each state by whether it voted red (Trump) or blue (Clinton) in 2016.
A number of clear conclusions jump out of these data. The red squares appear to be bunched in the lower left corner of this graph (low taxes, short lifespans), while the blue dots are stretched out over the top right (high taxes, long lifespans).
There is a wide disparity in life expectancy among the states, from a low of 75.0 years in Mississippi to a high of 81.3 years in Hawaii. That’s a difference of more than 6 years. That should be alarming to all Americans.
Second, people in blue states pay more taxes than people in red states. The per capita average in blue states is $16,939 compared to $10,885 in red states. Ten of the top 12 most taxed states are blue.
And third, people in blue states live longer than their red counterparts, by an average 79.8 to 77.6 year margin. That’s a full 2.2 years of life that a blue state resident gets, on average, that a red state resident loses. Of the states with lifespans greater than 80 years, 10 out of 12 are blue. Only Utah and Wisconsin are red, and I fully expect Wisconsin to come to their senses by the next election cycle.
It is also clear that life expectancy is correlated with taxes. States with the highest tax rates also have the longest life expectancy, and low tax rates are correlated with shorter lifespans. I am not claiming that there is a direct cause-effect relationship, but the correlation is statistically significant. I will leave it to others to explain.
The table also shows a delta for each state, which is the difference between the state’s actual life expectancy compared with the prediction from the trend line. What do the deltas mean? If your state has a positive delta (lies above the line), that suggests that your politicians are making effective use of your taxes to provide you with a life expectancy that is greater than the trend predicted by the outcomes of the other 49 states.
Conversely, if you show a negative delta, your taxes are not being used effectively to extend your lifespan. Perhaps your taxes provide other benefits that are not reflected in these statistics, but the health of you and your fellow citizens, as measured by mortality rates, is not being addressed as effectively as it is in other states.
It is not a coincidence that the blue dots are mostly above the trend line (overperforming), while the red squares are mostly below (underperforming), even when tax rates are similar. I leave the implications of this observation to the reader.
The outliers provide some fascinating case studies. I am not a social scientist, and I suspect that others may have greater insights into root causes than I do, but let me list a few states that caught my attention. Perhaps others can provide some context.
Delaware
The state of Delaware is a clear outlier. It has the highest tax rate of the 50 states and is reliably blue, but its middling mortality rate is not significantly better than many red states. Citizens of Delaware appear to have a strong case that their tax dollars are not being used effectively to improve their health. The correlation factor R2 improves significantly, from 0.21 to 0.28, and the slope of the trend line gets dramatically steeper if Delaware is removed from the data pool.
Hawaii
Tax rates in blue Hawaii are modest, but it shows the longest life expectancy of all the 50 states. Whatever is going on in Hawaii, I want me some of that.
Utah
Notoriously red Utah has the unusual combination of low tax rates and long life expectancy. Kudos to the people of Utah for a highly effective use of tax funds to maintain their health.
District of Columbia
Keen observers may have noticed that DC is not included in these statistics. In fact DC pays by far the highest taxes in the country ($48,768 per capita), and has only a modest life expectancy (76.5 years). I have intentionally removed DC from this analysis because it is a unique beast in the American political system. It is not governed by a local political body as the states are, and has limited representation to control the use of its tax money. It is therefore not playing by the same rules as the other states, so any conclusions drawn about DC would not apply to other states, and vice versa.
Mississippi
Poor, red Mississippi has the lowest tax rate ($7509 per capita), and shortest lifespan (75 years) of all the 50 states. It also has the largest delta (-2.6 years) of all the red states, indicating that even the low taxes that Mississippians pay are not being used effectively to improve their health.
California
I can’t finish this article without mentioning my maligned blue California. Our taxes are not the highest ($16,272 per capita), and our lifespan is pretty good (80.8 years), but not the highest. But significantly, our delta (1.8 years) is one of the best in the chart. Our Democratic leadership has created a tax structure that provides strong health benefits without too much pain. Our representatives are chosen from districts created by a bipartisan commission, which prevents gerrymandering and IMHO ensures that the will of the people is followed.
Conclusions?
Statistics can be painfully boring, but profound insights can often be gleaned by analyzing the data. Mortality statistics across the United States suggest that residents of blue states are healthier than those in red states. Tax rate statistics suggest that higher taxes are favorably correlated with mortality. Call me crazy, but if I were a resident of a red state, I would be calling my local, state, and federal legislators, demanding that my taxes be raised, not lowered, and that the increased revenues be used to improve my health and the health of my fellow citizens. Starting now.