We all know that the cost of living varies from state to state and from city to city. The Tax Foundation has produced a map that shows the real value of $100 in each state. Prices for the same goods are often much cheaper in Missouri or Mississippi than they are in New York or California. The same amount of money can buy more in low-price states than in high-price states.
The first thing you notice by looking at the map is the obvious correlation with politics. In general, the low-price states are the red states, and the high-price states are the blue states. The west and northeast are not only the blue states, but they also have less buying power. The red states clustered in the south and Midwest have more buying power.
The regional differences are striking. Alan Cole writing for the Tax Foundation explains that real purchasing power is 36 percent greater in Mississippi than it is in the District of Columbia. Put another way, you need an after-tax income in D.C. of about $68,000 to equal an after-tax income of $50,000 in Mississippi. To compensate, government and businesses often pay higher salaries in these high-price states.
He also compares the states of California and Nebraska. People in these two states earn approximately the same amount of dollars per capita. But after adjusting for regional price parity, people in Nebraska can buy more.
There is obviously a difference in real value within a state. The cost of living in Manhattan, for example, is much greater than living in the Adirondacks in upstate New York.
These differences in the cost of living also have policy implications. Most economic policies (tax brackets, food stamp eligibility) set at the national level do not take into account the significant differences in the cost of living. This map is a reminder that $100 goes much further in some parts of America than in others.