Is California a high-tax state compared to red states like Texas and Florida? It depends! Here's what things look like if you're rich:
California is a ball-buster, with the second highest tax rates in the country. Texas and Florida are way down the list.
But what if you're working class? Let's take a look:
California is about average, with a tax rate lower than either Texas or Florida. Texas has the ninth highest tax rate in the country if you're working class.
This all comes from the Institute on Taxation and Economic Policy, which earlier this year published its latest data on tax rates by state. Overall, California is indeed a high-tax-high-service state, but the big difference is that Texas and Florida tax grocery store clerks and janitors way more than they tax millionaires. California taxes them less.
I think we all knew this but it would be important to understand how state and local taxes (not income taxes), plus insurance and cost of living figure into the "livability" of each state
Those costs of living are much higher in California, chief among them being the much higher housing costs. But all this depends on what question you're trying to answer. Governments have, at best, an indirect effect on those cost-of-living factors. What they directly control is taxes and how they levy those taxes represents a choice. States that have progressive tax rates have lower taxes on the middle class and higher taxes on upper incomes compared with flat-tax states.
Not always.
While insurance and maintenance cost more in California, plenty of groceries cost less (especially if you're willing to visit a grocer who may not speak English as their first language).
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"Those costs of living are much higher in California"
People in Texas sure like to say that, but I think the gap is much narrower than is often claimed.
I've lived in California and in Texas, and while many headline costs in CA *are* higher, so are salaries. And in California you don't need to have flood insurance, pay for almost-year-roud air conditioning to make the climate tolerable, white-knuckle your way through every hurricane season, etc (or deal with fire ants and all other manner of delightful tropical insects that render backyards and parks obnoxious obstacle courses). And I'll say from experience that the housing stock in Texas, while cheaper, is absolute garbage (example: despite freezing temperatures being an annual occurance in Houston, pipes are so poorly insulated that there is a non-zero chance that the occasional cold snap will freeze and rupture your pipes).
Plus, in just the past four years in Texas I've experienced two separate weeklong power outages, something that never once occurred in the 15 years I lived in the Bay Area. That imposes an enormous cost in terms of lost work, and/or paying for backup batteries, generation etc. to make up for the flimsy and unreliable power grid.
Toss in the generally poor public services, and the gap shrinks even more.
Anyway, while California may be a high tax, high service state, Texas is definitely a low service but medium tax state.
If you go to the full report, they list out the least regressive states. In that calculation they include a measure of reliance of income tax for revenue as well as sales taxes, which is similar to what you are talking about.
Minnesota ranks as one of the least regressive (only DC is better), in large part because of the reliance on income taxes and the existence of refundable tax credits. The state has fairly high sales taxes, but those are not levied on clothing or groceries, which tempers their regressivity.
Edit: Minnesota and a few others are not regressive at all - taxes are actually progressive by their measure. California is also one of the non-regressive 5.
Good point. Looking at income taxes gives you only a small part of the picture. New Hampshire has no state income tax and no sales tax. Sounds great, right? Think about it a minute and you'll see the problem. What's left to generate revenue? Property taxes. Big problem.
Ditto what FrankM said. If states like Texas want to sell their desirability based on overall cost of living, have at it. But politicians scoring points by demonizing blue states purely based on alleged high taxes should have actual facts to back it up, which, as this post shows, they just don't.
My parents moved to New Mexico about 15 years ago. They were shocked by the cost of insurance.
I do taxes as an AARP Tax Aide. This year a woman who had moved here two years ago from Oklahoma told me she was confused, because she thought that taxes were supposed to be so high. She was paying a little more, but making a lot more. She was afraid that we weren’t doing her taxes right, but since she was a W-2 person, they were just about impossible to screw up.
I can not dispute the tax data but want to raise a relevant point about quality of life.
You discuss store clerks and janitors, and I look at migration patterns: are more middle class folks moving from California to Texas, or is the flow in the other direction? Why is that?
Stated differently, if one is comparing a store clerk in a major California city (Los Angeles, San Francisco, San Jose, San Diego etc) to a similarly earning person in a major Texas city (Houston, Dallas, Austin, San Antonio etc), taxes are only a small element of their quality of life.
In Texas, at say a wage of $75,000 per year, your clerk is much more likely to be a home owner/or thinking about buying a place, kids in a reasonable school, not face homeless on a regular basis. So yes, if one focuses just on taxes, California might be superior for the clerk: however, most people concerns are much broader than just their personal tax rate.
if your clerk is making 75 grand in texas, he's probably working two jobs, plus lots of overtime.
a store clerk in texas making $75k is using the store as a front for dealing fentanyl
"In Texas, at say a wage of $75,000 per year, your clerk is much more likely to be a home owner/or thinking about buying a place, kids in a reasonable school, not face homeless on a regular basis."
The median household income in California is north of $85k per year. In Texas, it's more like $67k. So, yeah, that $75k per year clerk will have relatively more money in TX than CA; they are also much less likely to exist.
In Texas, the minimum wage is $7.25, in California the minimum wage is $16. Two store clerks doing the same job in the two states are not making anywhere close to the same income. At minimum wage, the Texan would have to work 28 hours per day, every day.
Want a high income? You're gonna, and gotta, pay high taxes. Want low taxes? Enjoy Mississippi.
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I have this conversation frequently with people who want to move to a "low tax" state. The problem with doing this is you have to live there.
Florida doesn't have income tax. Property tax, sales tax look in line with my home state, Maryland. Are there other taxes that significantly affect middle class? Do they have taxes for all sorts of services, like trash pickup and schools?
Here's the way I look at it: there's no free lunch. You want services? Someone has to pay for it. Low taxes = low services. Beyond that, it's only a question of who does the paying. Some states try to do that as equitably as possible. Some don't
But that's the point in a lot of states. Don't provide services to the freeloaders because it reduces their incentive to be productive and increases their reliance on the government.
Roads, schools, emergency rooms, court systems, fire and police, safety inspectors, etc. don't just serve "freeloaders".
But don't the lower tax rates on corporation and rich people entice business into the state, creating jobs and raising wages?
For wage/salary earners who want to decide where to live, the most relevant thing might be average or median wage/salary, after taxes. This should be real compensation, corrected for prices in the state including housing.
For several reasons I doubt that red states in general would come out ahead in this.
For a corporation deciding where to locate, taxes is a consideration, but only one of many, and not even the most influential. Availability of capable workers, infrastructure, proximity to suppliers and markets and other costs of doing business are all more important.
“Total State Tax Rate” I take it then this is not just income taxes?
Had a chance to follow the link. Indeed, is is not just income taxes. It includes sales and excise taxes etc.
But does it include property taxes, which California infamously has a problem with raising (while states like Texas don't)?
California does not impose the state income tax o Social Security benefits.
I found this out when planning my retirement. Very well concealed by all the caterwauling about our high taxes.
Only 10 states do tax SS benefits. So California is in line with most of the country here.
"Texas and Florida tax grocery store clerks and janitors way more than they tax millionaires. California taxes them less."
Well, as someone once said, there are no poor, working-class people in America, only temporarily embarrassed millionaires. So those store clerks and janitors will continue moving to FL or TX because they're just on the verge "of making it big" and when they do, oh boy, easy street, baby!
I live in CA but have family in Florida. Florida charges tourists a lot in the form of bed taxes, sales taxes, rental car taxes, etc. That helps keep the tax burden on residents low. In addition, virtually every expressway is a toll road, and the tolls are high, which hits both residents and tourists. Basically Florida nickels and dimes people for everything to avoid having an income tax.
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