Google has recently changes the way sub folders work so Google now treats sub domains as the same website,
That been said the sub folder is normally a far better option due to internal linking factors behind the domain and it works as a more powerful option over time from my experience.
You can do internal re directs, we have done 100s over the years and not had many dramas, just make sure you map out the correct re directs to correct folders.
I would really research the level of localized traffic per sub folder, research into the new Google changes into sub folders, and look at Google ad preview for GEO based serps based on your domains based per state to see what the potential problems could be. You really need to do a risk analysis for the client, we have done a few of these recently for global travel clients who have had similar issues.