Relative Value Of $100 In Purchasing Power By State: How Far Does Your Dollar Go?

Relative Value Of $100 In Purchasing Power By State: How Far Does Your Dollar Go?

Relative Value Of $100 In Purchasing Power By State: How Far Does Your Dollar Go? Image: MMG

After the Great Recession, total personal income bounced back in all states as the economy expanded, but the expansion was uneven.

Your $100 goes further in some states than others because incomes and the cost of goods and services vary by state. There are low-price states and high-priced states when it comes to real purchasing power.

The first quarter of 2020 was the last quarter to largely avoid the economic effects of the pandemic since shutdowns began only in its last few weeks, according to a Sept. 14, 2020 Pew Trusts report. 

Based on 2018 figures — the latest released by the U.S. Bureau of Economic Analysis (BEA) — $100 in Mississippi is worth much more than $100 in New York.

For example, $100 is worth the most in Arkansas ($117.23), Mississippi ($116.28), Alabama ($115.74), Kentucky ($113.90), and West Virginia ($113.90). On the other hand, $100 is effectively worth the least in Hawaii ($84.67), New York ($85.91), the District of Columbia ($86.13), California ($86.66), and New Jersey ($86.81), according to The Tax Foundation, a leading independent tax policy nonprofit. 

Real purchasing power is more than 35 percent greater in Arkansas than it is in California. This means that, on average, someone who nets $50,000 in after-tax income in Arkansas would need to net about $67,500 in California to maintain the same standard of living.

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Areas with higher costs of living tend to pay higher salaries for identical jobs, offsetting at least some of the lower average purchasing power. But that’s not always the case.

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North Carolina has higher-than-average incomes without corresponding higher-than-average prices. Residents of South Dakota and Delaware earn about the same amount of nominal dollars per capita, but people in South Dakota can buy more after adjusting for regional price parity.

“That is why it is important to adjust incomes for different price levels, as it can change our perceptions of the standard of living for each state,” Garrett Watson wrote for The Tax Foundation.

The U.S. Bureau of Economic Analysis (BEA) measures real personal income by state and metropolitan area each year. The latest estimates are for prices in 2018, which can be used to show how much $100 buys you in every state.

Source: U.S. Bureau of Economic Analysis

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