A recent social media post by Kostas Moros on X (formerly Twitter) has reignited discussions about the economic models of states like California, Texas, and Florida. Moros highlighted the absence of state income tax in Texas and Florida, contrasting it with California's progressive tax system, which he suggested leads to higher costs for residents.
"Texas and Florida have no state income tax at all. And when you soak the rich and corporations like CA does and Gavin brags about, they respond by passing those costs down. Another reason why CA has such a high cost of living," Moros stated in the tweet.
California indeed levies a personal income tax, with the top marginal rate reaching 13.3% for high earners, and an effective rate of 14.4% in 2024 for the highest brackets. In contrast, Texas and Florida are among the nine U.S. states that do not impose a state income tax on wages. These states typically rely more heavily on other forms of taxation, such as sales and property taxes, to fund public services.
However, analyses from organizations like the Institute on Taxation and Economic Policy (ITEP) suggest a more nuanced picture regarding the overall tax burden. While high-income earners in California generally face higher tax rates, low- and middle-income families in California may pay similar or even lower overall tax rates compared to their counterparts in Texas and Florida. This is because the latter states’ reliance on consumption and property taxes can disproportionately affect lower-income households. For instance, Texas has one of the highest property tax rates in the country, and both Texas and Florida have higher sales tax rates than California.
California's high cost of living, particularly housing, is a significant factor contributing to its expense, independent of income tax rates. Housing costs in California are nearly double the national average, driven by limited land availability, restrictive zoning laws, and high demand. Other contributing factors include elevated prices for groceries, transportation, and healthcare services, which are often higher than the national average.
The debate underscores differing economic philosophies, with some arguing that California's progressive tax system aims to fund robust public services and social safety nets, while others contend that it incentivizes businesses and high-income residents to relocate. The interplay of various taxes and living expenses creates a complex economic landscape that varies significantly across states and income levels.