Wahrheit Ventures, Las Vegas, is out with a new algorithm and app that it claims yields a much more realistic picture of the cost of living, city by city.
The rankings were derived from patent-pending technology utilized in its recently launched mobile application, City Vs City. The app, and resultant ranking, were developed to answer the question: “How much does a household need to earn before taxes in another city to maintain the same lifestyle currently enjoyed in their current city?”
A close examination of the City Vs City ranking quickly showcases how essential it is to consider the overall tax implications when comparing the cost of living between two different cities. This is primarily due to the compounding effect that all forms of taxes have on the amount that a household must earn to maintain the same standard of living; a factor that is not accounted for in other cost of living rankings.
For instance, a hypothetical move from Denver to a similar ZIP Code area cost-wise in San Francisco shows a need for 78% more after-tax income to cover costs. However, since City Vs City takes all forms of taxation into account, it shows the need for 109% more gross income to cover the increase spending costs. Total taxes (income, property, sales) as a percentage of gross income range from 25% (Casper, WY) to 45% (Manhattan, NY).
This is a big difference, and shows that failing to account for taxation when comparing cost of living between cities could cause serious errors in estimation.
The algorithm also takes account of actual dollar amounts for major spending categories and bases the housing cost estimates on median home prices for the same size home across all 253 equivalent ZIP Codes. Such precision can be crucial given that housing costs are typically a household’s greatest after-tax expense.
According to the ranking, New York City’s Manhattan, with an equivalent ZIP of 10022, represents the city requiring the most gross income to cover a household’s cost of living. By comparison, McAllen, Texas (ZIP 78552) required the least. The median city in the rankings, Lansing, Michigan (#127), provides the equivalent standard of living at $81,700, which is still about 18% less than what someone needs to earn before taxes in Denver.
Review the full City Vs City rankings by clicking here. The City Vs City app can be utilized to determine the precise cost of living differences between any two of these cities.
