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In general, which state and/or city in the United States has the best combination of income tax rate, living expenses, and working wage?

When people talk about optimal conditions, a state without income-tax may seem like the obvious choice, but living expenses may be higher in that state, reducing the benefit of no state income tax. Major cities like San Francisco or New York City tend to be associated with higher salary rates, but living in/around these cities brings higher living expenses.

I understand this could vary greatly by job sector, so if you could make suggestions based on jobs in technology, services, and healthcare sectors, I would greatly appreciate your help! Thanks

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  • Probably Alaska. No state income tax, no property tax, and you get a pipeline check from the government every year. Cost of essentials can be pricey though.
    – JohnFx
    May 15, 2020 at 16:42
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    This is too broad, even within states you have a lot of variation in housing prices/sales tax. Just know that states without income tax typically have higher sales/property taxes to make up for it. And, lower taxes in some states means fewer/worse services. Earning potential varies wildly too.
    – Hart CO
    May 15, 2020 at 17:46
  • Not really answerable. If nothing else, we'd need to know what sort of work you do - not a whole lot of demand for ski instructors in Miami, for instance :-) Then there are all sorts of intangible quality of life factors that affect most of us. Of course the ideal (at least if you're in a field where it's possible) is to live in a low tax & cost of living place with lots of recreational opportunities, and telecommute to your job in a high wage, high COL urban place.
    – jamesqf
    May 16, 2020 at 3:35

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Efficient market theory suggests that to the extent people are free to move within the US, all locations should become equally desirable on net (accounting for costs and benefits). Thus, if you want the most monetarily advantageous place, you would look for places that are undesirable on non-monetary criteria: places with some combination of bad weather, long commutes, high crime, little access to culture or recreation, etc. (Of course some of these have monetary effects, like heating/cooling costs, transportation costs, or losses to property crime, but they also have non-monetary effects on well-being.) In theory, the difference between salaries and cost of living would have to be higher in these areas to incentivize people to stay -- in effect, they earn a bonus for putting up with an unpleasant environment.

Now, while there is some truth to this, it is not reality because people are often tied to a given place for personal non-monetary reasons like friends and family. This means they get a "bonus" that a random person moving there will not get. Thus, when some people are "captives" of their town, salaries do not have to be as high to make up for an objectively less pleasant environment. However, you are still likely get some net monetary benefit from living in a swamp or a run-down neighborhood where costs are lower. And this is especially so if you "bring your own income" as a teleworker or a retiree. In that case you're simply minimizing living costs without regard to local salaries -- see here.

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  • Thank you for your answer! My biggest takeaway might be to not tell an interviewer if I have any connections to the location I'd be working at to avoid that "captive" deduction.
    – jros
    May 16, 2020 at 17:49
  • @jros It depends. If an employer has their needs fully met by local workers, they may have no reason to offer you more. And if you really want to work there despite being overqualified or taking a pay cut, you should consider emphasizing your local ties as the reason, lest you get no offer because of the perception that you are "running from something" or will leave at the drop of a hat.
    – nanoman
    May 16, 2020 at 20:50

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