Which is the Cheapest US State?
Everyone knows that California is the most expensive state in which to live in the country. During the pandemic, you could do something about it, thanks to Zoom (ZM), which allows you to work from any place, anytime.
That has given rise to one of the newest concepts in the jobs and real estate market known as “Interstate Arbitrage.”
It’s really very simple. Get an online job in an expensive state where you can work online but live in a bargain basement state. Your savings will explode beyond all imagination.
This is especially important to Millennials early on the savings curve who look at real estate prices on the coasts and blanche. A cozy two-bedroom in San Francisco’s posh Pacific Heights? How about $5,000 a month for rent alone!
Of course, we all know the highest paying states; California, New York, and Washington. These all have punitive state taxes on top of high-end federal taxes, like California’s 13% rate, with millionaire surcharges on top of this. Add it all up and state and federal taxes come to a backbreaking 52% a year.
On the other hand, some nine US states have no tax at all, including Alaska, Florida, Nevada, New Hampshire, South Dakota, Tennessee, Texas, Washington, and Wyoming.
Mississippi has the cheapest housing in the US at 55% the cost of California housing, followed by Alabama, Arkansas, and West Virginia at 60%.
The best place to fix stuff is in Alabama, Mississippi, and Tennessee, which is 16.6% cheaper than California. Nevada is 10.5% cheaper to buy goods. The discount is less here thanks to the proliferation of large national retail chains.
Add it all up and the cheapest state to live in is Arkansas at a 27.7% discount to CA, followed by Alabama t 26.3% and West Virginia at 25.2%.
Companies have gotten wise to “Interstate Arbitrage” and are demanding part of the action in the form of big pay cuts for distant employees. They love the cut in overhead expenses and didn’t like those nerds in their offices so much anyway.
Employees are fighting back by not actually disclosing that they put down stakes in New Hampshire, Wyoming, or Nevada. Warning: Your iPhone can bust you at any time, recording your exact location 24/7.
It’s becoming a big issue as up to 30% of stay-at-home workers are never expected to come back to the office. It partly explains why shares of these mostly tech companies have been on such a meteoric tear for the past nine months.
If you like Interstate Arbitrage, you will absolutely love international career arbitrage. You can live like a prince in Budapest for $1,000 a month, and like a king in Monte Negro for $750, or Malaysia for $500.
Riga in Latvia has become a major European tech hub and even offers a technology visa for transplanted Americans. And their broadband is better than found in most US states.
I guess you can get used to eating grits, rooting for the Razorbacks, and enjoying the Apple blossom, the state flower of Arkansas. Chances are that the equity in your California home alone will allow you to purchase a much larger home in “The Natural State” for all cash.
I have to tread lightly here because I already have many subscribers in Arkansas, the birthplace of Bill Clinton.
But you get what you pay for. It’s a good rule of thumb that the less you pay in state taxes, the worse the education system. If your kids have already grown up, it’s not an issue, as long as you don’t mind talking to stupid people every day.
Of course, those who live in the Golden State say it is worth the price, with its balmy climate, diversity of recreation opportunists, fabulous beaches, majestic mountains, and incredible rate of innovation.
It’s much better to pay high taxes on a $10 million annual income, entirely possible at a big tech company than low taxes on a $50,000 job.
As for me, I think I’ll work a little harder and keep those incredible Pacific sunsets and fantastic Dungeness crabs, sourdough bread, and Anchor Steam Beer.
To find where your state ranks on a number of parameters, please visit the interactive map by clicking here.
