The cost of living is higher in Utah than in 27 other states, a new study says. Still, Utahns have it a bit better than the average American.
The Tax Foundation, a national think tank that researches tax issues and generally opposes tax increases, released the study about the real value of $100 in each state — noting that the same goods are cheaper in some states than others.
In Utah, $100 will buy goods and services that would cost $103.09 in a state at the national average price level, it said. That essentially means that Utahns are 3 percent richer than their incomes suggest.
While that is above average, it ranks only No. 28 among the 50 states, according to the study based on data developed by the U.S. Bureau of Economic Research.
Mississippi residents receive the biggest bang for their buck. The real value of $100 there is $116.01.
Other states where $100 is worth the most are Alabama ($115.21), Arkansas ($114.42), South Dakota ($113.38), and Kentucky ($112.87), the study said.
In contrast, $100 is effectively worth the least in Hawaii ($84.18), the District of Columbia ($85.47), New York ($86.73), New Jersey ($88.18) and California ($88.18).
“Regional price differences are strikingly large; real purchasing power is 36 percent greater in Mississippi than it is in the District of Columbia,” the study said.
“In other words, by this measure, if you have $50,000 in after-tax income in Mississippi, you would need after-tax earnings of $68,000 in the District of Columbia just to afford the same overall standard of living.”
The study notes that states with higher incomes also tend to have higher price levels. “This is because in places with higher incomes, the prices of finite resources like land get bid up,” it said. The same pressure tends to create higher salaries for the same types of jobs.
However, the study notes that some states, like North Dakota, have high incomes without high prices.
“New Yorkers and North Dakotans earn approximately the same amount in dollars per capita, but after adjusting for regional price parity, North Dakotans can buy more,” it said.
The Tax Foundation says politicians should take into account the differences in cost of living because many policies — like minimum wage, welfare benefits and tax brackets — are denominated in dollars.
“But with different price levels in each state, the amounts aren’t equivalent in purchasing power,” it said. “This has some unexpected consequence — people in a high price-level state like New Jersey will often pay more in federal taxes without feeling particularly rich.”