In the 1970s I created an institution at MSU, the Center for Political Economy and Natural Resources. Among its programs was one to introduce nationally prominent journalists and editors to environmental economics. We attracted top talents from top publications (e.g. Forbes, the New York Times, the Wall Street Journal, and the Washington Post). When I visit the East, our “graduates” often introduce me to their colleagues. Here is a column one of them shared with me during my last visit. Its author, Amity Shlaes, tells us of yet another advantage of living here: relatively low marginal tax rates to achieve a comfortable lifestyle.

-- John Baden

It is Summer and I dream of Montana. I dream of Big Sky and Lone Mountain. I dream of Flathead Lake. And I dream of acreage, endless acreage.

This ranch-in-Montana fantasy is a common one for the American male -- and even some females. Dwellers in big, expensive cities know they are missing something that goes beyond a vacation-oriented lifestyle. That something is the greater purchasing power of people who live in cheaper places like Montana.

Their trouble is not merely cost of living, although that is a large factor. It is also a more complicated syndrome we will dub the “San Francisco Squeeze.” The squeeze is the consequence of being caught between two things: the high cost of living in big cities on the one hand and the progressive structure of the U.S. tax code on the other.

You need a much higher income to maintain the same style of life in Boston than you need in Missoula or Great Falls, Montana.

But the extra income that represents your cost-of-living adjustment also pushes you into a higher tax bracket. U.S. tax brackets are adjusted for inflation, but they are not adjusted for differences in the cost of living in different places. So a good share of that extra money goes to your national capital, not you.

The Tax Foundation in Washington has a “squeeze meter” for U.S. cities. It started with a simple geographic cost-of-living index. Then it looked at the tax burdens shouldered by those with nominally higher wages in high-cost cities. The foundation found that the progressive rate structure overcharges people who live in high-cost cities while undercharging those in low-cost areas. (The study did not look at state and local taxes, although these also affect after-tax income and relocation decisions.)

The differences are striking. In New York, a married couple needs $159,621 in income to achieve the median U.S. standard of living. That nominal income means the family’s effective federal tax rate is something like 20 percent. In Billings, Montana, it takes only $71,501 to get the average American lifestyle. That couple’s federal tax burden is merely 10.7 percent. Another example: An income of $132,000 in San Francisco brings you about the same value that you get for a mere $84,111 in Portland, Oregon, also a highly livable port city. But in San Francisco a family pays over $22,000 in federal tax on that income, whereas in Portland they pay less than $11,000.

And, of course, there is Montana, where I can have five bedrooms with a mountain view, a barn, and fields for the dog to ramble across. Montana begins to sound attractive, especially when you consider that for the same purchase price, $525,000, you can get a one-bedroom shoe box, if that, in Manhattan.

The squeeze has a political context. When presidential candidate John Kerry says that he will raise taxes on the wealthy, he is, to a serious extent, targeting the cost-of-living challenged (the squeezed). I got a letter from the wife of a doctor with a practice in an expensive town (Hinsdale, Illinois). A mother of four, she was working towards her nursing degree, but was having a hard time doing it; the taxes plus the cost of living made things a struggle.

But back to the Tax Foundation report. Put most simply, what it says is that in Montana we could have a nicer house than we have in New York and cut back on work, all without sacrificing standard of living.

Montana, here we come.