California's seemingly high salaries seem relatively mundane when you factor in the state's expensive lifestyle and tax burden.
The annual “Price Parity” report published by the U.S. Bureau of Economic Analysis provides a snapshot of the relative differences in costs and revenues among the 50 states. My Trusty Spreadsheet reviewed the latest statistics for 2023 detailing how spending is squeezing California's revenue.
It's no surprise that California is one of the most expensive places to live.
According to BEA calculations, the state's cost of living is 11.2% higher than the national standard. California was followed by New Jersey at 8.2% above average, followed by Hawaii and Washington at 7.9% and Massachusetts at 7.6%.
Arkansas is one of the best bargains in the country, with a cost of living 15.6% lower than the average American. Mississippi is next with 14.5% below average, followed by South Dakota with 13.5% and Louisiana and Oklahoma with 13.3%.
And how will California's big economic rivals fare on this cost metric?
Florida was the 11th most expensive state, at 3.4% above average. Texas was the 21st most expensive state, 2.9% below the norm.
But this cost of living score is only one part of the overall “affordability” equation.
payday plus
The typical Californian can offset some of their high expenses thanks to their employer's generous pay.
Consider that in 2023, the state had the sixth-highest per capita income at $81,300. The typical U.S. income was $69,800, down 14%.
States with higher salaries than California include Massachusetts at $90,600, Connecticut at $89,900, New York at $82,300, and New Jersey and Wyoming at $82,100.
At the other end of the salary range, Mississippi has the lowest income at $49,700, followed by West Virginia ($52,800), Alabama ($54,200), New Mexico ($55,300), and Kentucky ($55,400). Ta.
Texas was 24th with $66,300. Florida State was 19th with $68,700.
tax officer
Californian incomes also face the fourth-highest tax burden, according to BEA calculations.
In 2023, California's effective tax cost, or personal taxes paid as a percentage of per capita income, was 14.9%, compared to the national rate of 12.2%.
New York ranked first at 16.9%, followed by Massachusetts at 16% and Connecticut at 15.4%. Maryland was fifth at 14.2%.
Conversely, Mississippi residents pay the lowest taxes at 7.7% of their income. Next is Alaska at 7.9%, South Dakota at 8.1%, Oklahoma at 8.4%, and Tennessee at 8.5%.
Florida had the 23rd highest rate at 11.3%, while Texas had the 8th lowest rate at 9.2%.
conclusion
Next, consider a measure of the relative purchasing power of Californians compared to other states.
After subtracting cost-of-living increases and taxes from these high salaries, Californians will have a relative spendable income of $61,400 in 2023. This ranks 26th in the median among states and is only $100 higher than the national rate of $61,300.
Now, those who love California might say that the moderate cash flow justly compensates for the state's many non-financial attractions. This is one reason why the state has one of the lowest out-migration rates in the nation.
But critics of the Golden State will argue that this theoretical income doesn't suit many residents, especially those who earn below-average wages. These exorbitant expenses are why California has a hard time attracting residents from other states.
By the way, Wyoming ranks first in revenue after adjusting costs and taxes at $80,100, followed by South Dakota at $75,600, North Dakota at $73,600, Connecticut at $73,400, and Nebraska at 71,000. It is in dollars.
Workers in Mississippi earned the least on this wage scale at $52,500, followed by West Virginia ($53,500), Hawaii ($53,700), and Alabama ($54,400). ), Georgia ($54,700).
And what about California's rivals? Texas ranked 23rd with $61,900, and Florida ranked 37th with $58,900.
Jonathan Ranzner is a business columnist for Southern California News Group. Please contact us at jlansner@scng.com.
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