Talking to a brick wall

Help me feel better. Tell me about the last time you talked to a brick wall.

We're probably be hiring someone who is moving to Austin, from Houston. She makes a significant amount more than we can will offer her, but that's not an issue. She has been doing something more specialized, that involves being willing to work irregular hours, and in a higher risk acute environment. She's at a point where she doesn't mind making a bit less, because her priorities are different, this is a different level of responsibility, etc. etc.
In other words, she's fine with the deal, and actually sought us out, because this is where she wants to live.

While we were speaking, she had mentioned parenthetically that the cost of living is lower in Austin than Houston. I thought "I'm not sure about that", but, whatever.

I looked at what the 3 other people in my area, in that position make, and saw that we'd still be able to offer a respectable amount.

I sat down with my boss to discuss the numbers, and here's where the fun starts. I prefixed the conversation by saying "This is that person that's making more money, but is fine with taking a cut because of the job, etc. She's making $$$, the 3 other people are currently making between $$$ and $$$. I think she'll be ok with the high end of those numbers.

Boss: We can't pay her $$$, she's going to have to take a cut.
Me: Yes, that what I said.
Boss: That's not what the market for this different position will pay.
Me:

Me: Do you happen to know if it costs more to live in Houston?
Boss: No, I've never lived there.

Me: (deciding to continue) I thought it was interesting, that she said the cost of living in Houston was higher, but in fact based on what she's making, she'd have to make 15% more, per a couple of cost of living comparison calculators I looked up on the interweb. Not (I said uselessly, apparantly) that it makes any difference, it was just interesting she thought that.
Boss: That doesn't make any sense.
Me:

Boss: (Veering off onto worn ground) We offer salaries based on the market of what that position pays here.
Me: (as if I didn't know this already) Yes, I was just mentioning that she thought it cost more to live in Houston, and it doesn't.

Boss: That doesn't make sense.
Me: (Chai, just walk out of the room) What do you mean?
Boss: How could it cost more?
Me: Well.....if you were moving from here to Manhatten, the cost of living would be much greater....
Boss: But you said Houston.
Me: Yes, but it costs different amounts to live in different cities. People don't all work in this industry, and when they move they are going to look at what it will cost to live there.
Boss: What costs more here?
Me: Looking at website...Well, housing for one is more expensive.
Boss: No. (no?) My house doesn't cost nearly has much as a house in Houston or Austin.
Me: well....that's because you don't live in Austin....(thinking...you live in some butt hump little community you'd have to pay me to go near)

Boss: I don't understand why Cost of Living enters into it.

ok......I extricated myself as soon after this as possible.
I realize I trod on a landmind.

But...wtf?
Are you hearing the words that are coming out of my mouth?