Tax Foundation study examines “real” value of $100
By TED CARTER
Mississippians or visitors to Mississippi with $100 in their pockets are walking around with a $16.69 bonus.
But head over to Arkansas and you will lose more than a dollar of the bonus. In Alabama, you’ll lose even more of it.
If you stay in Mississippi, at least to shop and spend your money, you’ll be more than 16 percent richer.
So says a new research report from the nonpartisan Tax Foundation that looks at the “real” value of $100 in terms of purchasing power in each state. Mississippi’s $16.69 is tops nationally, followed by Arkansas’ $115.61 and Alabama’s $115.34.
The three states share struggling rural communities whose jobs have departed and vast stretches of poverty, especially in agricultural regions.
Those gloomy circumstances factor heavily in how much things cost. So, it seems Mississippians can help ease the gloom by spending at home and, in return, benefit from the “real” value of the goods they buy.
The report’s three authors – Robert Bellafiore, Aida Vazquez Soto and Scott Eastman – suggest: “With different price levels in each state, the amounts (the $100) aren’t equivalent in purchasing power.”
The Tax Foundation researchers say it ultimately boils down to the same amount of cash buying you comparatively more in a low-price state like Mississippi than in a high-price state.
They found that regional price differences are strikingly large; real purchasing power is 35 percent greater in Mississippi than it is in New York. “In other words, by this measure, if you have $50,000 in after-tax income in Mississippi, you would need after-tax earnings of $67,500 in New York just to afford the same overall standard of living,” they said.
The U.S. Bureau of Economic Analysis has been measuring this phenomenon for four years now; it recently published its data for prices in 2017. The Foundation report researchers say they used the data to reach the adjusted value of $100 to show how much it buys in each state.
Mississippi’s Number One ranking in the Tax Foundation report doesn’t surprise state economists, at least in one sense, said Corey Miller, economic analyst at the University Research Center, part of the Mississippi Institutions of Higher Learning.
Mississippi has topped or been tied for the top among the states since 2008, when the Bureau of Economic Analysis began calculating what is known as regional price parity, or RPP, Miller said in an email.
It’s largely about housing costs, according to Miller.
“The RPP calculation assigns weights to the values making up an individual’s total expenditures and in general housing costs represent a person’s largest single expenditure,” he said.
Miller said the harder truth of regional challenges is in play, and explained it this way: “… while achieving a given standard of living may require a smaller income in Mississippi than in, say, New York, proportionally fewer people in Mississippi have the ability to earn that smaller income.”
On the policy implications of regional price parity, Miller said he sees New York, San Francisco and metro Washington, D.C., as ground zeroes for a housing crisis that has left people unable to live “at least close to the same city where they work.”
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