Which States' Residents Have the Most Cash to Spend?
From Motley Fool, October 05, 2014 (excerpts)
...This year for the first time, the Bureau of Economic Analysis released cost of living data for each state . Data on personal income and average taxes paid, meanwhile, has been available for a long time. Everyone knows these three metrics vary greatly by state. But what happens when you combine the three?
When you take into account the large differences in cost of living, disposable income varies nowhere near as much as you might think at first glance....
The Bureau of Economic Analysis defines "disposable personal income" as total personal income minus personal current taxes. Basically, it's the amount of income people have left over after paying taxes. You can see per-capita disposable income by state below. Note that the data is from 2012, because that is the most recent data that the Bureau of Economic Analysis provides for regional price parity.
Though it's not a state, D.C. ranks No. 1 by per-capita disposable income at $65,770. The state with the highest per-capita disposable income is Connecticut, at $50,534, followed by North Dakota, at $49,273. Massachusetts ($48,160), New Jersey ($48,108), and Maryland ($47,222) round out the top five. This only tells one side of the story -- the income side.
On the cost side, cost of living varies greatly by state with the Northeast, as well as both coasts, generally having a higher cost of living. I've shown before that most of the difference is due to the cost of housing , as people want to live on the coasts and near other people. If you take into consideration the different costs of living, some states move higher when ranked by disposable incomes, while others drop. The moves can be significant.
The "real" value of average disposable income
If you account for the differences in cost of living, you get a much different picture from the one above. Again, the data is current as of 2012.
Of the original top five, the biggest drop came from New Jersey, which fell from No. 4 in nominal per-capita disposable income to No. 11 in real per-capita disposable income, at $42,163. The $5,945 drop was matched only by New York and Hawaii, which each dropped comparable amounts. While Hawaii is one of the happiest states in the U.S. , it is in the bottom five as ranked by real per-capita disposable income....
(Hawaii disposable income = $34,683 rank 47th of 51. Only NM, AZ, ID, and UT are poorer.)
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