A $100 bill may literally be worth $100 wherever you go in the U.S., but its purchasing power can vary significantly. The non-profit organization The Tax Foundation has quantified the difference in purchasing power on a state-by-state basis and released the results on their website.
The Tax Foundation used data available from the Bureau of Economic Analysis (BEA) to adjust the purchasing power of $100 up or down based on average price differentials in states, and presented the information in a color-coded interactive map showing what $100 is effectively worth in each state.
The state where your money has the least purchasing power is not actually a state – it is the District of Columbia at $84.60. As an entirely metropolitan area wedged in an overpriced region between Virginia and Maryland, it is no surprise that DC leads the list.
The second most expensive place is Hawaii at $85.32, fueled in large measure by the high cost of transporting products — like gasoline — to the middle of the Pacific Ocean.
New York residents have just $86.66 worth of purchasing power and New Jersey residents are just slightly ahead at $87.64. Californians have the fifth lowest purchasing power at $88.57.
The five states with the highest purchasing power are, in order, Mississippi with $115.74, Arkansas at $114.16, a tie between Missouri and Alabama at $113.51, and South Dakota at $113.38.
Interestingly, $100 does not actually have $100 purchasing power in any of the 50 states or DC. The closest is Illinois at $99.40. (The survey doesn’t say, but we wonder if the lost 60 cents ends up in sofa cushions.)
The values are often representative of the relative amount of urban area in the state, but not as predictably as you might expect. To follow up on their state map, the Tax Foundation released a second color-coded map with the purchasing power on the county level, thus highlighting the differential in urban vs. rural areas.
By hovering the mouse over a particular area, you can see the dollar value for metropolitan clusters as well as for the rural areas of a state on average. The most striking aspect of this map is how contiguous the rural areas of purchasing power tend to be – the Midwest and most of the South are very solid with the highest rural purchasing power, with a less powerful rural block in the West and the coastal areas having the least rural purchasing power.
While some of this may be predictable, there are important ramifications that are not so obvious. For example, The Tax Foundation points out that means-tested federal benefits generally do not consider these differences; therefore, their value varies widely. A benefit amount that does not provide sufficient relief in Honolulu or New York City may completely remove the incentive to work in rural Mississippi.
However, attempting to rectify benefits by scaling to state purchasing powers would likely cause a firestorm in Congress. This is where state and local tax policy plays a role.
In addition, while lower purchasing power tends to be prevalent in higher income areas, that is not always the case – and even where it is, those on the lower edges of the pay scale can disproportionately suffer the effects. One example from The Tax Foundation’s website is a bar graph adjusted for purchasing power showing that Kansans had a higher purchasing power than New Yorkers despite considerably lower wages.
These maps may not help you as you deal with price comparisons at your local markets, but if you are planning to relocate, you can compare the purchasing power of different areas of the country. It may not make the decision for you, but it should be one of the factors to consider.