Wednesday, August 20, 2014

The Real Value of $100 in Each State

The states where $100 is worth the least are the District of Columbia ($84.60), Hawaii ($85.32), New York ($86.66), New Jersey ($87.64), and California ($88.57). That same money goes the furthest in Mississippi ($115.74), Arkansas ($114.16), Missouri ($113.51), Alabama (113.51), and South Dakota ($113.38).


As we showed in an example in our recent paper on income data, adjusting for prices reveals average real incomes in Kansas to be higher than in New York, despite New York having much higher incomes as measured in dollars.
The tax policy consequences of this data are significant. For example, because taxes must be calculated based on nominal income, the average New York resident pays significantly more in taxes than the average Kansas resident. But the Kansas resident actually has higher purchasing power, meaning that they get to pay lower taxes despite getting to have a richer amount of consumption.
source

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