California’s seemingly lofty paychecks look relatively run-of-the-mill when considering the state’s costly lifestyle and tax burdens.
The annual “price parity” report from the US Bureau of Economic Analysis gives us a snapshot of relative differences among the 50 states in costs and incomes. My trusty spreadsheet reviewed the latest stats for 2023, which detail how expenses squeeze California’s incomes.
Look, it comes as zero surprise that California is the priciest place to live.
The state’s cost of living is 11.2% higher than the national norm, according to BEA math. After California came New Jersey at 8.2% above average, followed by Hawaii and Washington state at 7.9% and Massachusetts at 7.6%.
Arkansas is the nation’s bargain spot, with life costing 15.6% less than the typical American’s. Mississippi is next, at 14.5% below average, South Dakota is at 13.5%, and Louisiana and Oklahoma are at 13.3%.
And how do California’s big economic rivals fare by this cost metric?
Florida was 11th most expensive, 3.4% above average. Texas had the 21st highest costs at 2.9% cheaper than the norm.
But this cost-of-living score is just one slice of the overall “affordability” equation.
Sky-high expenses are somewhat offset for the typical Californian thanks to their employer’s generous pay.
Ponder that the state’s per capita income in 2023 ranked sixth-highest at $81,300. The typical US income was $69,800 – 14% less.
The states with better pay than California were Massachusetts at $90,600, Connecticut at $89,900, New York at $82,300, New Jersey and Wyoming at $82,100.
At the other end of the paycheck spectrum, Mississippi had the lowest income at $49,700, followed by West Virginia ($52,800) and Alabama ($54,200), New Mexico ($55,300), and Kentucky ($55,400).
Texas was No. 24 at $66,300. Florida was No. 19 at $68,700.
California’s incomes are also challenged by the fourth-highest tax burden, according to BEA math.
California’s effective tax cost for 2023 – that’s personal taxes paid as a share of income, per capita – was 14.9% vs. the nation’s 12.2% rate.
New York was No. 1 with 16.9%, followed by Massachusetts with 16% and Connecticut with 15.4%. Maryland was No. 5 with 14.2%.
Conversely, Mississippians pay the lowest taxes at 7.7% of income. Alaska follows at 7.9%, South Dakota at 8.1%, Oklahoma at 8.4%, and Tennessee at 8.5%.
Florida was 23rd highest at 11.3%, but Texas was eighth-lowest at 9.2%.
Ponder next a yardstick of a Californian’s relative buying power compared with other states.
Take those lofty paychecks, minus the elevated cost of living and taxes, and you get a relative spendable income of $61,400 for each Californian in 2023. That’s a middling 26th-best among the states and just $100 above the nation’s $61,300.
Now, California lovers might say middle-of-the-pack cash flow is fair compensation for the state’s many non-financial charms. It’s one reason why the state has one of the nation’s lowest rates of departures to other states.
However, Golden State critics will argue that this theoretical income does not add up for many residents, especially those who earn below-average wages. These crazy expenses are why California struggles to attract residents from other states.
By the way, Wyoming ranks No. 1 for this cost-and-tax-adjusted income at $80,100 – followed by South Dakota at $75,600, North Dakota at $73,600, Connecticut at $73,400, and Nebraska at $71,000.
Mississippi had the least-compensated workers by this pay benchmark, at $52,500, followed by West Virginia ($53,500), Hawaii ($53,700), Alabama ($54,400), and Georgia ($54,700).
And California’s rivals? Texas ranked 23rd at $61,900, while Florida ranked 37th at $58,900.
Jonathan Lansner is the business columnist for the Southern California News Group. He can be reached at jlansner@scng.com
