Here in the Bay Area, we constantly bemoan the fact that the cost of living is so high relative to other parts of the country. That fact was quantified last week by the Tax Foundation. An article originally posted by Mandi Woodruff succinctly summarizes the findings. I though readers would find it to be interesting pieces of data.
A new map released by the Tax Foundation shows exactly how far $100 would go in all 50 states.
Using recently released data from the Bureau of Economic Analysis, the Tax Foundation was able to show exactly how the varying prices of goods, housing and income taxes in each state can impact consumers’ purchasing power.
Southerners and Midwesterners have a serious edge over those along the East and West Coasts. A hundred bucks goes the furthest in Mississippi, where $100 will buy you what would cost $115.74 in another state that's closer to the national average. As the Tax Foundation puts it, Missippians are about 15% richer than their nominal incomes suggest. The next low-price states are Arkansas ($114.16), Missouri ($113.51), and Alabama ($113.51). Meanwhile, $100 would only be worth $84.60 in the District of Columbia, the priciest state, $85.32 in Hawaii, $86.66 in New York and $87.64 in nearby New Jersey.
It’s no surprise that the states where people earn more tend to have higher prices for goods, services, and housing. High income-tax rates can also limit the the purchasing power of workers, depending on the state they live in. The state income tax rate in Kentucky is among the lowest in the nation at 6%. Comparatively, in Washington, D.C., the income tax rate is 8.95%. In part due to lower income taxes, a hundred-dollar bill in Kentucky is worth 33% more than it is in D.C. Someone earning $40,000 in Kentucky would need to earn at least $53,000 in Washington, D.C. just to maintain the same standard of living.
Now you can see why retirees so often choose their retirement destination based on tax rates. When you're on a fixed income, the cost of living in your state can make or break your nest egg.
Check out this map to see how income tax rates vary by state: