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Texans Don’t Pay More Taxes Than Californians Do, Reports Show

California to Texas

"California to Texas" by artnoose is licensed under CC BY-NC-SA 2.0.

Texans don’t pay more taxes than Californians do, reports show, they pay about a third less, contrary to the Houston Chronicle.

(The Center Square) – As thousands of Californians continue to move from California to Texas, the Houston Chronicle reported, “Texans actually pay more in taxes than Californians do.”

But a former California legislator and Texas Public Policy Foundation’s Chief National Initiatives Officer, Chuck DeVore, argues, “Nothing could be further from the truth.”

Findings from analyses published by the Tax Foundation and Stanford University’s Hoover Institution also conflict with the Houston Chronicle’s claim.

The Chronicle cites a report published by the San Antonio Express News citing 2018 data published by the Institute of Taxation and Economic Policy (ITEP). ITEP’s report evaluated IRS income tax, sales tax, property tax, Bureau of Labor Statistics’ Consumer Expenditure Survey information, and U.S. Census Bureau data.

Express News cites a tax professor at the University of Texas’s law school, Robert Peroni, who says the data from the 2018 report hasn’t changed in four years and California’s income taxes “actually do more to lower inequality.”

The Chronicle also cites a Progress for the People Instagram post that claims, “California has the most ‘equitable’ state/local tax structure in the US, while Texas has the 2nd least. Despite right [wing] propaganda to the contrary, Texas is not low tax for the people most in need. They only care about reducing taxes for the rich, not about helping the poor and creating an equitable system.”

According to a Tax Foundation analysis, Californians pay $6,813, per capita in state and local taxes every year compared to Texans paying $4,481.

“That’s about two-thirds of what Californians pay,” DeVore said.

He also argues the ITEP report is from “a left-leaning group funded by organized labor.”

The ITEP report ranks states based on “estimating the share of income the richest 1% pay in state and local taxes versus the poorest 20%, and then calculates the gap,” DeVore said. It also focuses on “who pays, rather than how much is paid” and uses the data “to answer a quantitative question (which state’s residents pay more) rather than the subjective topic it was originally gathered to address (fairness).”

Higher taxing states don’t help the poor, DeVore argues. According to ITEP, the District of Columbia and California have the most fair tax systems in the U.S.

U.S. Census data shows they have the highest Supplemental Poverty rates, DeVore notes. The Supplemental Poverty Measure accounts for cost-of-living differences among states, the amount of taxes paid, and the type of noncash benefits low income individuals and families receive including food, housing, childcare, and medical assistance.

Texas is one of seven states that levies no individual income tax.

California’s top individual income tax rate is 13.3% with a state and local tax burden of 13.5%, according to the Tax Foundation. It also has an 8.84% corporate income tax rate, a 7.25% state sales tax rate, a max local sales tax rate of 2.5% and an average combined state and local sales tax rate of 8.82%.

By comparison, Texas levies no individual income tax or corporate income tax. It levies a gross receipts tax. It also has a 6.25% state sales tax rate, with a maximum local sales tax rate of 2%, and an average combined state and local sales tax rate of 8.2%.

California’s tax system ranks 48th on the Tax Foundation’s 2022 State Business Tax Climate Index, Texas ranks 14.

It’s not just the reports that point to the tax disparity of the two larges stats in the country.

Of the record number of people and companies moving out of California, they’ve repeatedly cited cost of living and high taxes as reasons for leaving. Those moving to Texas, now estimated to be roughly 1,000 a day, cite low cost of living and no personal income or corporate tax as their reasons for relocating. So many more people have moved to Texas over the past decade that it gained two additional Congressional seats.

In 2020 alone, under California Gov. Gavin Newsom, California reported the first ever population decline in state history and also lost a congressional seat.

According to a study by McKinney-based Spectrum Location Solutions and Stanford University’s Hoover Institution, Texas is beating every other state as a destination for California companies by a ratio of 4:1.

California company headquarter exits more than doubled in 2021, the study found. Its authors warned, “California is experiencing a serious loss of company headquarters to other states. The phenomena, which includes business in nearly all industries, has gone virtually unrecognized by the state’s elected officials and governmental agencies.

“Unless policy reforms reverse this course, California will continue to lose businesses, both large established businesses, as well as young, rapidly growing businesses, some of which will become the transformational giants of tomorrow.”

Since the report was published, California legislators and Newsom doubled down on increasing taxes whereas Texas Gov. Greg Abbott recently pledged to use half of the state’s $27 billion surplus to provide property tax relief to home owners.

Originally published by The Center Square. Republished with permission.

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