Red states are the economic future
The conventional wisdom in politics is that the coasts represent the economic future of the United States. Higher incomes and potential growth seem to be with cities like New York, San Francisco, and Seattle. Even in the aftermath of her 2016 election loss, Hillary Clinton famously dismissed flyover country. She declared, “I won the places that represent two-thirds of American gross domestic product. So I won the places that are optimistic, diverse, dynamic, moving forward.”
In many ways, however, the coastal regions that Clinton lauds represent the equivalent of a personal finance ponzi scheme. While many topline statistics like average income appear on the surface to show much higher standards of living in states like New York and California, a deeper dive into the numbers tells a different story altogether.
Poor policy decisions in blue states, including higher taxes on both the wealthy and working people, housing barriers, and higher prices due to regulation mean that higher incomes vanish upon inspection. When accounting for the cost of food, housing, and commodities, the dollar goes significantly further in red states than in it does in blue states. A hundred dollars will get you less than $90 worth of goods and services in New York and California. In Texas, Florida, and across the mountain west except for Colorado, a Benjamin Franklin will buy you more than its value. Across the midwest, the value actually exceeds $110.
Comparing state level purchasing power is a bit of raw data, especially considering the disparity of cost between rural and urban areas. When the same $100 is ranked by metropolitan area, the numbers get even starker. Across much of the south, the same bill will purchase more than $120 in goods and services. In Seattle it is $89, in Los Angeles it is $85, in Manhattan it is $82, and in San Francisco it is $78.
Even worse, these figures do not take into account the sky high cost of rent and taxes in blue states. The average cumulative tax rates in most of these Democratic strongholds is indeed far higher than their Republican counterparts. The combination of gas, sales, income, local, and capital gains taxes eats into the incomes of residents who live in New York, California, Illinois, and Connecticut even more.
Try an experiment using back of the envelope math. The average 2018 per capita income in New York is $68,690, while in Texas it is $50,360. At first glance, the New York salary seems more attractive. But after correcting for cost of living, taxes, and housing costs, Texas comes out ahead. New Yorkers pay the highest tax burden in the nation, at nearly 13 percent of their annual income, while Texans pay about 8 percent.
After taxes, New Yorkers rake in an average of $59,800 annually, while Texans take home $46,240. If you live in Manhattan, you pay an average of $35,340 each year for a one bedroom apartment. In Austin, one of the highest cost of living cities in Texas, the same apartment will run you $17,200, plus more square footage. Minus taxes and housing, you take home $24,460 a year in Manhattan and $29,040 a year in Austin.
Accounting for the cost of goods, Texas wins even further. The actual value of $99 your $100 brings you in Austin compared to the $82 in Manhattan means that your true adjusted take home pay is about $28,900 in the Lone Star State capital and exactly $20,000 in the Big Apple. Even with the higher income in Manhattan, moving to Austin means picking up nearly a 45 percent increase in you discretionary income.
For young people just entering into their careers, experienced workers reaching their prime earning years, and older retirees alike, the results are the same across the board. Living in red states usually means that you not only have a better chance to get and keep a job or run a business, but the money you earn will go much further. This is, in large part, why people are fleeing San Francisco, where houses worth $1 million are described as “rundown shacks,” and why New York is losing some 270 residents each day, more than any other city in the United States.
Still, the poster children for progressive policies are doubling down. In New York, an increased state tax on the sale of homes that are worth more than $1 million, not uncommon in Manhattan, caused an actual drop in real estate sales in the city by up to 16 percent. California passed state rent controls last month, which will bring predictable results.
Poor policy decisions in blue states result in housing supply restrictions, overregulation of business, and taxes and fees galore. The accumulated policies in these laboratories of democracy show the true growth and opportunities for families are in those regions that have recognized you can only ignore the laws of economics for so long.
Kristin Tate is a libertarian writer and an analyst for Young Americans for Liberty. She is an author whose latest book is “How Do I Tax Thee? A Field Guide to the Great American Rip-Off.” Follow her on Twitter @KristinBTate.
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