Ask not how much can you do for your Benjamins, but how much those Benjamins can do for you. The answer may depend on the state where you live.
The map below, crafted by the research nonprofit Tax Foundation, shows the real value of $100 adjusted to reflect average consumer prices in each state.
In Mississippi, for example, $100 would buy the equivalent of $115.34 worth of goods in a place where prices are closer to the national average. In a more expensive place, your dollars wouldn’t go as far: For people in the District of Columbia, $100 is worth just $84.67.
The calculations are based on data released last month by the Bureau of Economic Analysis.
The agency assessed the values based on what are called “regional price parities,” defined as the measure of differences in prices for goods and services between regions. The data also reflect the year-over-year changes in the bureau’s Personal Consumption Expenditure price index, which tracks changes in national prices over time.
For the most part, states with higher nominal incomes also have higher price levels, because the prices of finite resources, such as land, get bid up.
“But the causation also runs in the opposite direction,” Alan Cole, an economist at the Tax Foundation, wrote in a blog post. “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.”
The implications of this data could be substantial to public policies based on dollar amounts.
“Many policies ― like minimum wage, public benefits, and tax brackets ― are denominated in dollars,” Cole wrote. “But the different price levels in each state, the amounts aren’t equivalent in purchasing power. This has some unexpected consequences; people in high price-level states like New Jersey will often pay more in federal taxes without feeling particularly rich.”