Pay rose 3.1%, prices 3.4%: what a raise is really worth after tax, by state
A raise is taxed at your top rate, not your average one. We put the national August pay rise through every state’s taxes at that state’s median wage and set it against inflation — the second month running it fell short.
In the twelve months to August, average hourly pay for private-sector workers rose 3.09%, from $36.62 to $37.75. Prices rose 3.40%. Before tax, that is a gap of 0.31 percentage points — close enough to call it keeping up.
After tax it is not close. A raise is not taxed at your average rate. It is taxed at your marginal rate — the rate on your last dollar. Stack federal tax, Social Security, Medicare and state tax at each state’s median wage and that marginal rate runs 1.2 to 1.5 times the average rate. So take-home grows more slowly than the raise does.
We put the national 3.09% rise through every state’s taxes, at that state’s own median full-time wage. In 51 of 51 jurisdictions the after-tax raise came in below 3.40%. The median worker keeps between 62% and 80% of the raise; the rest goes in tax before it reaches the bank.
A worked example: Texas
Texas has no income tax, so this is the gentlest case. The median full-time wage there is $48,620. A 3.09% raise adds $1,500 to gross pay. Federal income tax and FICA take $295 of it — a marginal rate of 19.7%, against an average of 15.2% on the salary itself — leaving $1,205 — 80%. Take-home rises 2.92%, against prices up 3.40%.
Every state, at its own median wage
Sorted from the smallest shortfall to the largest. “Against prices” is the year’s take-home after the raise, compared with this year’s take-home grown by 3.40%.
| State | Median wage | Raise | You keep | Take-home up | Against prices |
|---|---|---|---|---|---|
| Alabama | $45,670 | $1,409 | $1,070 (76%) | 2.89% | −$186/yr |
| Kentucky | $46,920 | $1,448 | $1,113 (77%) | 2.90% | −$190/yr |
| Indiana | $47,860 | $1,477 | $1,143 (77%) | 2.91% | −$190/yr |
| South Dakota | $47,080 | $1,453 | $1,167 (80%) | 2.92% | −$192/yr |
| Tennessee | $47,380 | $1,462 | $1,175 (80%) | 2.92% | −$192/yr |
| Nevada | $47,660 | $1,471 | $1,182 (80%) | 2.92% | −$193/yr |
| Pennsylvania | $49,690 | $1,533 | $1,185 (77%) | 2.92% | −$193/yr |
| Florida | $47,880 | $1,477 | $1,187 (80%) | 2.92% | −$194/yr |
| Mississippi | $40,120 | $1,238 | $945 (76%) | 2.82% | −$194/yr |
| Arkansas | $43,630 | $1,346 | $1,032 (77%) | 2.86% | −$195/yr |
| Texas | $48,620 | $1,500 | $1,205 (80%) | 2.92% | −$195/yr |
| Louisiana | $45,520 | $1,405 | $1,086 (77%) | 2.88% | −$197/yr |
| Michigan | $49,270 | $1,520 | $1,157 (76%) | 2.90% | −$199/yr |
| Wyoming | $50,270 | $1,551 | $1,246 (80%) | 2.93% | −$200/yr |
| Oklahoma | $45,600 | $1,407 | $1,067 (76%) | 2.86% | −$200/yr |
| Illinois | $51,960 | $1,603 | $1,209 (75%) | 2.91% | −$201/yr |
| West Virginia | $45,300 | $1,398 | $1,064 (76%) | 2.85% | −$204/yr |
| North Dakota | $52,480 | $1,619 | $1,301 (80%) | 2.93% | −$205/yr |
| North Carolina | $47,970 | $1,480 | $1,130 (76%) | 2.87% | −$205/yr |
| Arizona | $50,060 | $1,545 | $1,203 (78%) | 2.89% | −$209/yr |
| Iowa | $48,540 | $1,498 | $1,147 (77%) | 2.87% | −$212/yr |
| Georgia | $48,170 | $1,486 | $1,120 (75%) | 2.86% | −$212/yr |
| Kansas | $48,010 | $1,481 | $1,108 (75%) | 2.85% | −$213/yr |
| New Hampshire | $55,880 | $1,724 | $1,385 (80%) | 2.94% | −$214/yr |
| Montana | $48,740 | $1,504 | $1,138 (76%) | 2.86% | −$214/yr |
| Idaho | $47,970 | $1,480 | $1,111 (75%) | 2.85% | −$215/yr |
| Delaware | $52,190 | $1,610 | $1,198 (74%) | 2.87% | −$218/yr |
| Missouri | $47,800 | $1,475 | $1,116 (76%) | 2.84% | −$218/yr |
| New Mexico | $47,210 | $1,457 | $1,108 (76%) | 2.84% | −$218/yr |
| Nebraska | $48,980 | $1,511 | $1,146 (76%) | 2.85% | −$219/yr |
| Ohio | $49,380 | $1,524 | $1,182 (78%) | 2.86% | −$219/yr |
| Wisconsin | $50,270 | $1,551 | $1,170 (75%) | 2.85% | −$222/yr |
| Oregon | $57,000 | $1,759 | $1,267 (72%) | 2.89% | −$224/yr |
| Vermont | $56,390 | $1,740 | $1,340 (77%) | 2.91% | −$224/yr |
| Utah | $50,110 | $1,546 | $1,173 (76%) | 2.85% | −$225/yr |
| Maryland | $59,510 | $1,836 | $1,388 (76%) | 2.92% | −$226/yr |
| Alaska | $61,000 | $1,882 | $1,512 (80%) | 2.95% | −$226/yr |
| Rhode Island | $56,780 | $1,752 | $1,323 (75%) | 2.90% | −$228/yr |
| Washington | $62,990 | $1,944 | $1,535 (79%) | 2.96% | −$229/yr |
| Massachusetts | $63,590 | $1,962 | $1,470 (75%) | 2.94% | −$230/yr |
| Virginia | $55,690 | $1,718 | $1,282 (75%) | 2.88% | −$231/yr |
| New York | $59,670 | $1,841 | $1,372 (75%) | 2.91% | −$231/yr |
| Colorado | $59,800 | $1,845 | $1,393 (76%) | 2.90% | −$238/yr |
| South Carolina | $46,490 | $1,435 | $1,078 (75%) | 2.77% | −$242/yr |
| Maine | $51,430 | $1,587 | $1,168 (74%) | 2.80% | −$249/yr |
| Minnesota | $56,920 | $1,756 | $1,284 (73%) | 2.83% | −$255/yr |
| New Jersey | $58,570 | $1,807 | $1,345 (74%) | 2.85% | −$256/yr |
| Hawaii | $56,320 | $1,738 | $1,268 (73%) | 2.82% | −$259/yr |
| Connecticut | $59,690 | $1,842 | $1,344 (73%) | 2.84% | −$262/yr |
| California | $58,240 | $1,797 | $1,313 (73%) | 2.81% | −$273/yr |
| District of Columbia | $91,540 | $2,825 | $1,747 (62%) | 2.55% | −$577/yr |
Why the spread runs the way it does
Alabama comes out best, $186 a year short; District of Columbia worst, $577 short. Two things drive it. A higher median wage sits in a higher bracket, so more of each extra dollar is taxed — District of Columbia’s median of $91,540 is the highest in the table, and it keeps only 62% of its raise. And a graduated state income tax takes a bigger bite of the last dollar than a flat one or none at all: of the ten states at the top of the table, 4 levy no tax on wages and 3 more tax them at a single flat rate.
What BLS itself says
The Bureau of Labor Statistics’ own Real Earnings release for the same twelve months, which deflates by seasonally adjusted prices, puts the change in real average hourly earnings at -0.3%. It also reports the fact that cuts the other way: the average workweek grew 0.6%, which lifted real weekly earnings to +0.3%. Across the whole workforce, people kept pace by working longer. The worker in the table above works the same hours both years, which is why hourly pay is the comparison that fits them.
What this does and does not show
It shows exactly how much of a raise tax takes, under 2026 rules, at each state’s median wage. It does not show what happened to any particular worker’s pay: every state gets the same national rise, not its own, and the median wage is a single point. Holding tax rules fixed also leaves out one thing that helps: the IRS raises the brackets and standard deduction for inflation each year, so for a raise that spans two tax years, part of the shortfall above is handed back. The tax taken from the raise itself is exact; the comparison with prices is the direction, not a bill.
This is the second month running. In the twelve months to July, pay rose 3.24% and prices 3.36%; in August the gap before tax widened to 0.31 points. The direction did not change; the table above was recomputed on the August figures.
Sources: BLS series CES0500000003 (average hourly earnings, all employees, total private, seasonally adjusted) and CUUR0000SA0 (CPI-U, all items, not seasonally adjusted), retrieved 2026-09-11; state median wages from U.S. Bureau of Labor Statistics, Occupational Employment and Wage Statistics (OEWS), May 2025 state estimates, May 2025. Single filer, no pre-tax deductions, federal, FICA, state income tax and state payroll contributions from this site’s 2026 engine. Local income taxes are not included.