Earlier this year, the U.S. Bureau of Economic Analysis published its findings for 2016 on states’ real personal income, and the Tax Foundation adjusted those findings, reporting that for every $100 spent Californians are only getting $87.41 worth of goods.
“It’s generally the case that states with higher nominal incomes also have higher price levels,” the Tax Foundation writes. “…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 in order to make up for the low purchasing power.”
For small business owners this could mean having to increase wages or benefits to make up for the state’s overall lack of purchasing power.
“This has substantial implications for public policy, which is often progressive with respect to income. Many policies–like minimum wage, public benefits, and tax brackets–are denominated in dollars. But with different price levels in each state, the amounts aren’t equivalent in purchasing power,” according to the Tax Foundation.
The states that gave residents the biggest bang for their buck included: Mississippi ($115.74), Alabama ($115.47), Arkansas ($115.07), West Virginia ($114.16), and Kentucky ($113.90).
