One nasty floater is the $100 bill — a Benjamin, or just ‘Ben’ — which is the top dog of currency most-desired to be in your wallet. However, contrary to popular bullshit, a Ben is only so-good as where Ben is at the time.
Now, thanks to the federal government this year, you can feel how your Ben counts, depending upon your state or city.
And shit-dog, here in California, a $100 bill is only worth $88.57.
(Illustration found here).
The US Tax Foundation made the $100 bill estimates using data furnished by the Bureau of Economic Analysis, depending on regional price parities and real personal income. Poor places seem to push up the value:
For example, Tennessee is a low-price state, where $100 will buy what would cost $110.25 in another state that is closer to the national average.
You can think of this as meaning that Tennesseans are about ten percent richer than their nominal incomes suggest.
The states where $100 is worth the least are the District of Columbia ($84.60), Hawaii ($85.32), New York ($86.66), New Jersey ($87.64), and California ($88.57).
That same money goes the furthest in Mississippi ($115.74), Arkansas ($114.16), Missouri ($113.51), Alabama (113.51), and South Dakota ($113.38).
Regional price differences are strikingly large, and have serious policy implications.
The same amount of dollars are worth almost 40 percent more in Mississippi than in DC, and the differences become even larger if metro area prices are considered instead of statewide averages.
A person who makes $40,000 a year after tax in Kentucky would need to have after-tax earnings of $53,000 in Washington, DC just in order to have an equal standard of living, let alone feel richer.
As it happens, states with high incomes tend to have high price levels.
This is hardly surprising, as both high incomes and high prices can correlate with high levels of economic activity.
However, this relationship isn’t strictly linear: for example, some states, like North Dakota, have high incomes without high prices.
Adjusting for prices can substantially change our perceptions of which states are truly poor or rich.
However, the boost may not be good:
The tax policy consequences of this data are significant.
For example, because taxes must be calculated based on nominal income, the average New York resident pays significantly more in taxes than the average Kansas resident.
But the Kansas resident actually has higher purchasing power, meaning that they get to pay lower taxes despite getting to have a richer amount of consumption.
Furthermore, this affects means-tested federal welfare programs.
A poor person in a high cost area – like Brooklyn or Queens – may be artificially boosted out of the range of income where they are eligible for welfare programs, despite still being very poor.
At the same time, many people in low-price states may be eligible for welfare programs despite actually being much richer than they appear.
If the same dollar value program is offered in New York City and rural South Dakota, it may be too small to help anyone in New York City, and yet so big it discourages work in South Dakota.
If I had my choice, a wallet-full of Benjamins would just stay there. And where do I get my $12 back?