Where you live still has a huge impact on how far your paycheck goes. According to a new analysis, workers in the top tier of states can enjoy nearly twice the earning potential of workers in the lowest tier, once you account for taxes, job strength, and the local cost of living.
Affordable Contractors Insurance looked at wage growth, employment conditions, affordability, and income inequality to find the states that currently offer the strongest environment for earning more and keeping more of it.
Below are the 15 states that ranked the highest on the study’s earning potential index, starting with the strongest overall performer.
1. Florida
Florida landed at the top of the list with an earning potential index of 99. The state combines a solid employment rate of 96.2% with an above-average labor force participation rate of 60.0%, which tells you there are jobs and people are working them. The absence of a state income tax (0%) means more of your paycheck stays in your pocket right away.
Florida also showed steady average wage growth at 5.1%, and it posted very strong domestic migration numbers, adding 872,722 people. That inflow usually happens when workers and employers both like what they see. Even with a midrange affordability score (66), the tax structure and job market make Florida a standout for people trying to build income.
2. Colorado
Colorado scored 90 on the earning potential index, helped by an excellent affordability index of 95. That means wages and salaries do a better job of covering local costs than in many other states. Its employment rate of 95.8% and labor force participation of 68.8% signal a very active labor market.
The state income tax sits at 4%, which is modest compared with high-tax states, and wage growth held at 4.2%. Colorado also gained 31,172 people through net domestic migration, suggesting workers see it as an attractive place to earn. For employees who want strong job availability without giving up too much of each paycheck to taxes or housing, Colorado delivers.
3. Washington
Washington earned an index score of 88, driven by high-quality jobs and a very strong employment rate of 95.5%. Workers there also benefit from impressive average wage growth of 5.8%, one of the better figures in the dataset, showing that paychecks are rising over time.
The state did register a small loss in domestic migration at -21,717, which can point to rising living costs. Even so, a labor force participation rate of 64.6% and an urbanization rate above 83% mean workers can access large, diversified job markets. For employees in growth industries, Washington still offers excellent earning conditions.
4. North Dakota
North Dakota posted an earning potential score of 87, thanks to a very high employment rate of 97.5% and the single best labor force participation rate in this group at 70.5%. That combination tells you people can find work and are actively working. Its state income tax is low, between 1.95% and 2.5%, so take-home pay stays relatively strong.
Average wage growth came in at 3.6%, not the highest, but stable. The state did see a small outflow in domestic migration at -6,450, which may reflect its rural nature. Even so, when you balance strong employment, low taxes, and good affordability (81), North Dakota remains a compelling place to earn.
5. Texas
Texas scored 86, powered by its 0% state income tax and a high employment rate of 95.9%. That tax advantage is meaningful for employees at every income level, because it raises take-home pay without requiring a raise from an employer. The labor force participation rate of 64.0% is healthy, especially in a large, diverse economy.
Texas also saw a huge net domestic migration of 747,730 people, which is usually a sign of economic confidence. Average wage growth was 3.1%, more modest than some rivals, so workers may need to be strategic about industries and metros. Still, the mix of no income tax, strong job markets, and rapid population growth puts Texas firmly in the top five.
6. South Dakota
South Dakota earned an index score of 85. With a 0% state income tax and an excellent employment rate of 98.1%, workers keep more of what they earn and can count on finding work. The labor force participation rate of 69.0% is one of the highest on the list.
The state’s affordability score of 62 is middle of the road, but it gained 21,370 people through domestic migration, so workers are clearly viewing it as a good deal. Average wage growth was 3.0%, which is solid in a low-tax environment. For employees who prize job security and take-home pay over big-city amenities, South Dakota offers real earning power.
7. Utah
Utah’s earning potential score was 84, reflecting a strong employment rate of 97.0% and a high labor force participation rate of 64.2%. The state income tax is an even 5%, which is manageable when wages and employment are this healthy.
Utah also posted a solid migration gain of 51,891, suggesting workers and families are moving in for both jobs and quality of life. Wage growth came in at 4.0%, and the affordability index of 63 keeps the overall cost picture reasonable. That balance of jobs, growth, and costs makes Utah a reliable place to build earnings over time.
8. Alaska
Alaska reached an earning potential score of 83. The state offers a 0% income tax and an above-average employment rate of 95.3%. Average wage growth of 5.8% is among the best in the group, which means paychecks have been rising faster here than in many other states.
However, Alaska did experience a net domestic migration loss of -19,564, and its affordability score of 55 is the lowest among the top states, reflecting the higher costs of living there. Even so, when workers do land jobs, they tend to pay well, and the lack of a state income tax helps offset some of those higher prices.
9. New Hampshire
New Hampshire scored 81, helped by a very strong employment rate of 97.0% and an affordability index of 66. The state’s income tax rate was listed at 3%, which is still low compared with many eastern states. Labor force participation was also healthy at 65.4%.
Net domestic migration was positive at 29,170, telling us that workers are moving in for the job market and overall living conditions. Average wage growth of 4.8% is another plus. For employees who want New England quality of life without the heaviest tax burden, New Hampshire remains a good bet.
10. Montana
Montana posted an earning potential score of 74. Its employment rate was 96.3% and labor force participation was 63.6%, both solid figures for a mostly rural state. The income tax ranges from 4.7% to 5.9%, which is higher than the zero-tax states but still manageable given the strong employment picture.
The state also gained 53,496 people through domestic migration, which is a big number relative to its size. Average wage growth of 3.4% is modest, and affordability at 63 is middle tier. Even so, the surge in people moving to Montana suggests workers see opportunity and are willing to pay a bit more to access it.
11. Tennessee
Tennessee scored 73. A 0% state income tax is the standout feature here, and it pairs nicely with a 96.4% employment rate. That means workers get to keep more of what they earn while having a very good chance of landing a job.
The state also posted a large domestic migration gain of 252,180, showing Tennessee remains attractive to households moving from higher-cost locations. Wage growth was 4.0% and the affordability index was 79, which is one of the better cost profiles in the group. For employees looking to stretch a paycheck, Tennessee checks several boxes at once.
12. Wyoming
Wyoming tied on the index at 73. Like several Mountain and Plains states, it offers a 0% income tax, a strong employment rate of 96.8%, and a high labor force participation rate of 65.4%. Those three together create a favorable environment for workers.
Wyoming also gained 7,305 people through domestic migration, which is notable for a small state. Affordability came in at 68, so costs are not out of control. The one softer spot was wage growth at 3.3%. Even so, for employees who want low taxes, good job access, and smaller communities, Wyoming delivers solid earning conditions.
13. Virginia
Virginia earned a score of 72, powered in part by an excellent affordability index of 91. That means salaries go further than many people expect, especially in areas outside Northern Virginia. The employment rate was 96.0%, and labor force participation was 67.3%, both strong.
The state income tax ranges from 2% to 5.75%, so workers do give up a bit more than in zero-tax states. Virginia did post a domestic migration loss of -34,497, likely reflecting higher costs near Washington, D.C. Even so, the mix of affordability, steady employment, and large, diversified job markets keeps Virginia in the top 15.
14. Nebraska
Nebraska scored 71 on the earning potential index. The state has a very healthy employment rate of 97.0% and an affordability index of 71, which keeps basic expenses in check. The income tax ranges from 2.46% to 5.84%, so workers will see some withholding, but not at the levels found in high-tax coastal states.
Nebraska did experience a modest domestic migration loss of -13,758, which can signal that some workers are seeking bigger markets. Still, with solid wage growth at 3.1% and a labor force participation rate above 64%, people who stay can find work and keep up with costs.
15. Indiana
Indiana rounded out the list with an earning potential score of 71. It posted a strong employment rate of 96.4% and a good affordability score of 73, which means workers can cover expenses without needing a top-tier salary. The state income tax is a flat 3%, which keeps taxes predictable.
Indiana also gained 30,239 people through domestic migration, suggesting families and workers see it as a stable, affordable place to live. Wage growth of 4.2% is right in the healthy middle. For employees who want Midwestern costs with steady jobs, Indiana is a practical choice.
Methodology
This ranking is based on a new study from Affordable Contractors Insurance that set out to find the U.S. states with the highest earning potential for employees.
Researchers first gathered statewide data on population, cost of living, median annual salary, median annual wages, unemployment rate, employment rate, state income tax, Gini coefficient (to show income equality), average wage growth, labor force participation, urbanization, and total net domestic migration. From these variables they built an affordability index using cost of living, median salary, and median wages so that states with good pay and manageable prices would stand out.
Nine normalized variables were then combined to create the final earning potential index: affordability index (20%), average wage growth (20%), employment rate (15%), state income tax (10%), Gini coefficient (5%), labor force participation rate (10%), urbanization rate (10%), unemployment rate (noted in the background data), and total net domestic migration (10%). Scores were scaled from 1 to 99, with higher scores meaning better overall earning potential. The 15 states above are the highest-ranked in this model.
