How far does $100 go in your state?

  • 21 August 2019
  • NormanL

The dollars in our pockets are good for all debts, private and public, in every state of the Union. But as any traveller can tell you, a dollar doesn't go as far in some parts of the country as it does in others. 

The government collects price data nationwide, and the Tax Foundaion has crunched those numbers to see how far $100 goes in each state. The results are fascinating:

South Dakota is a low-price state. There, $100 will buy you goods that would cost $113.38 in a state at the national average price level. In other words, South Dakotans are, for the purposes of day-to-day living, 13 percent richer than their incomes suggest.

The states where $100 is worth the most are Mississippi ($116.69), Arkansas ($115.61), Alabama ($115.34), West Virginia ($114.94), and Kentucky ($113.77). In contrast, $100 is effectively worth the least in Hawaii ($84.39), the District of Columbia ($85.54), New York ($86.36), California ($87.11), and New Jersey ($88.57).

And those differences add up when looking at costs of living across regions:

...real purchasing power is 35 percent greater in Mississippi than it is in New York. In other words, by this measure, if you have $50,000 in after-tax income in Mississippi, you would need after-tax earnings of $67,500 in New York just to afford the same overall standard of living.

It’s generally the case that states with higher nominal incomes also have higher price levels. This is because in places with higher incomes, the prices of finite resources like land get bid up. (This is especially true in cities.) What is also true is that places with high costs of living pay higher salaries for the same jobs. This is what labor economists call a compensating differential; the higher pay is offered to make up for the low purchasing power.

This relationship is important, although it does not always hold true. Some states, like North Dakota, have high incomes without high prices. Adjusting incomes for price level can substantially change our perceptions of which states are truly poor or rich.

For example, residents of Vermont and North Dakota earn approximately the same amount in dollars per capita, but after adjusting for regional price parity, North Dakotan incomes can buy more.

You can see how far a $100 goes in your state by clicking here.

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