A new report released by the ch state in the country, and it varies more than you might think.
The data used by the Tax Foundation to make the calculations came from the Bureau of Economic Analysis. BEA has developed a methodology using consumption data to estimate average price levels in each state for household consumption, including housing rent costs.
The price listed with each state is the relative spending power of $100 in that state. For example, in South Dakota, $100 will buy $113.25 worth of goods based on the national average price level. On the opposite end, $100 becomes worth $84.46 in Hawaii, a very expensive state.
Washington, DC, home to many federal agencies and federal employees, is near the bottom of the list with a value of $86.28 given the high cost of living in the area. This likely will not come as a shock to people living in or around DC. Five of the ten wealthiest counties in the country are in the greater DC area which is an indicator of the cost of living there.
The Tax Foundation had this to say in its analysis of the data:
It’s generally the case that states with higher nominal incomes also have higher price levels. This is because in places with higher incomes, the prices of finite resources like land get bid up. (This is especially true in cities.) 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.
It goes on to note, however, that this is not always true, pointing to North Dakota as an example of a state with high incomes but lower prices (it is number 18 on the list with a value of $109.29).
If you’re considering moving after retirement, a state with a lower cost of living is often an appealing factor for retirees on a fixed income who often choose to relocate from a state with a much higher cost of living.