The Purchasing Power of American Salaries Revealed by State
Earning a six-figure salary is something to be proud of. But in some American cities, taxes can significantly reduce your take-home pay.
Even in areas with a lower cost of living, it might (or might not) surprise you how little is left after Uncle Sam takes his dues.Â
Moving on Up
As you climb the income ladder in America, so do your taxes. SmartAsset determined how the purchasing power of different salaries changes across the country. They compared the after-tax income for three income levels, $80,000, $125,000, and $200,000, in 76 of the largest US cities. Then, they adjusted the figures for the cost of living in each place.
1: Bakersfield, California
High earners in Bakersfield, California, feel the tightening grip of taxes more than anywhere else. After accounting for taxes and local cost of living, a $80,000 salary is worth $52,528. With the cost of living 7.1% higher than the national average, $200,000 earnings are knocked down to $119,365 when you receive your paycheck.
2: St Paul, Minnesota
As one-half of the “Twin Cities” in Minnesota, St. Paul has a high cost of living that dwindles its residents’ paychecks. After taxes and local cost of living are factored in, $80,000 is more like $59,418. For those making over $80,000, taxes and the cost of living take away 5.8% more of their salary. A $200,000 income feels more like $136,830.
3: Minneapolis, Minnesota
Naturally, the other “Twin City” follows closely behind St. Paul. With similar metrics, those with high incomes in Minneapolis pay the price. Residents making $80,000 per year have a tax rate of 29.3%, and it jumps to 34.9% at $200,000.
4: St Louis, Missouri
While St. Louis enjoys the third-lowest cost of living across SmartAsset’s study, residents climbing the income ladder have increasingly less purchasing power. A person making $80,000 annually has about $65,447 after taxes. With an income of $200,000, higher taxes reduce one’s paycheck by an additional 5.67%.
5: Columbus, Ohio
Ohio’s capital sees relatively low tax rates and cost of living, 10.7% lower than the national average. There, an $80,000 income is worth $63,846. A $200,000 salary has a purchasing power of $148,326.
6: Lincoln, Nebraska
High earners who make more than $200,000 annually lose out on more than 5.61% of their salary in Lincoln, Nebraska. Those who make $80,000 have a reduced salary by 22.6%. A $200,000 salary is worth around $143,438.
7: Omaha, Nebraska
Omaha residents who make an $80,000 salary will see $61,463 on their paycheck after taxes and the local cost of living are considered. Its cost of living is 7.6% less than the national average. A $200,000 income has a purchasing power of $142,506.
8: Sacramento, California
With a cost of living 18% higher than the national average, an $80,000 income in Sacramento is nearly cut in half after taxes, reduced to $47,676. It’s similar to $200,000 incomes, which dwindle to $108,339. Someone who makes $200,000 sees 45.8% of their paycheck eaten up by taxes and living costs.
9: Cleveland, Ohio
When taxes and the local cost of living are taken into account, the purchasing power of an $80,000 salary in Cleveland is reduced by 24.1%. For a $200,000 income, that number rises to 29.4%. Climbing the ladder to the top means employees lose an additional 5.3% of their income, compared with an $80,000 salary.
10: Cincinnati, Ohio
Someone making $80,000 yearly in Cincinnati makes $60,345 after accounting for taxes and living costs. An individual earning $200,000 loses an additional 5.2% of their income to taxes.
Climbing Consequences
While many Americans dream of making $200,000 a year, those making that much can lose as much as 66% of it to taxes and the cost of living. At the same time, an $80,000 salary can lose as little as 12% to taxes. Which city and state you reside in can make a huge difference in how far your salary stretches.
Texas Taxes
If you want to climb the income ladder without as much of a burden on your paycheck, head to the Lone Star State. Texas is one of nine states without an income tax, and it is home to seven of the ten cities where each salary level in SmartAsset’s study goes the furthest.
On the Low
Across the board, Memphis, Tennessee, has the lowest tax rates for each income level. Depending on how much you make, you’ll be taxed up to 16.6% of your salary. El Paso, Texas and Oklahoma City, Oklahoma, follow closely behind, making them decent places for high earners.
Tax Equality
It’s no secret that it costs a pretty penny to live in big cities like New York City, San Francisco, Seattle, Miami, and Washington, D.C. These cities tend to offer more equitable tax treatment than others among different tax brackets. For example, someone making $200,000 in NYC loses just 2.7% more than someone with an $80,000 salary.
How Much Money It Takes To Be in the Top 1%
Whether you dream of being in the top 1% or think you might already be there, one thing is certain: The income a household makes to be in the top 1% club varies by state. Here’s how much you need to make to have a higher income than 99% of Americans.
How Much Money It Takes To Be in the Top 1% in Each State
25 Most Expensive Cities
Do you live in or are considering moving to one of the most expensive cities in America? These are the top 25 cities that’ll do a (lower) number on your bank account.
