California has one of the highest tax burdens among any state in the country. But don’t bring Texas into the conversation as some sort of tax oasis – according to an analysis by Progress for the People, most Texans actually pay more in taxes than Californians.
So why are people moving to Texas under the impression that the tax situation is better than California? Tax attorney Robert Wood told KNX News’ Rob Archer and Karen Adams that looking solely at income tax rates doesn’t give you the whole picture.
“Obviously, California has high rates – now, as of January 2024, up to 14.4% as the top rate starting in a few days, and Texas, of course, has no personal income [tax],” Wood said. “It's still true that people moving to Texas, if they have a high income, are way better off tax-wise. But what the study shows is if you look at lower-income or middle-income people, you’ve got to consider property tax, sales tax, gas tax, cigarette tax, all sorts of things to factor into if they're better off or not.”
The study found that while the top 1% of Texans only spent 3.1% of their income on taxes, compared to 12.4% in California, low- and middle-income Texans paid more than their Californian counterparts.
Wood advised anyone thinking about moving to look at their own personal situation and crunch the numbers to see if skipping town will pay off at the bottom line.
“You’ve got to look at the statistics, but look at yourself in particular,” he said. “So if you're somebody earning $25,000 to $50,000 … you're likely better to stay put in California.”
He added that while taxes might not be better in Texas, lower property values could still make it a better financial bet for homebuyers.
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