Iowa Ranks as Most Affordable State: A Key to Financial Health

A recent analysis by the Common Sense Institute has identified Iowa as the most affordable state in the United States. The study evaluated how much personal income remains for residents after taxes and primary expenses such as housing, utilities, groceries, health insurance, car insurance, gasoline, and childcare. The findings reveal that on average, Iowans retain 34.7% of their income, more than residents in any other state.

Neighboring states South Dakota, North Dakota, and Nebraska also ranked high, with residents keeping between 33.4% and 34.6% of their income. The national average retention was noted at 24.7%. Between 2019 and 2025, household income in Iowa increased by 30%, compared to a 22% rise in costs, enabling Iowans to save nearly 4% more compared to the pre-pandemic period. This highlights a major factor in financial risk management for residents.

Zachary Milne, a senior economist at the Common Sense Institute, credits Iowa's affordability to income growth outpacing the rising cost of living. In contrast, Hawaii, California, and Massachusetts were identified as the most expensive states, with lower percentages of income remaining after expenses. Sean Finn, a policy analyst at Common Good Iowa, acknowledges Iowa's relative affordability but stresses the need for ongoing discussions about wages, income, and corporate profits, which have not sufficiently benefited workers.

Iowa Governor Kim Reynolds highlighted the report, attributing the state's affordability to tax cuts and fiscal policies, including tax reforms such as a flat income tax and eliminating taxes on retirement and inheritance. She believes these measures help maintain a balanced budget and foster economic growth, aligning with regulatory compliance requirements for fiscal health.