Why California Isn't Actually the Highest-Tax State for Everyone

There's a scene in every California-to-Texas migration story where someone does the math on their tax savings and discovers they'll pocket an extra $15,000 a year by moving to Austin. The numbers are real, the savings are real, and the smug satisfaction of escaping California's 13.3% top marginal rate is extremely real. What's less discussed is the person making $75,000 who moves from Sacramento to Dallas and somehow ends up with less money in their bank account at the end of the year, despite Texas having zero state income tax. This happens more often than you'd think, and it happens because we talk about tax rates the way we talk about weather — as if everyone experiences the same storm.

California does have the highest state income tax rate in the country. That part is true. But it doesn't have the highest tax burden for everyone at every income level, and sometimes it's not even close. The reason has to do with how progressive tax systems actually work, which is to say they work completely differently depending on whether you're earning $50,000 or $500,000. And the second you start factoring in sales tax, property tax, and the cost of literally everything else that determines how much of your paycheck you get to keep, the simple narrative — California expensive, Texas cheap — starts to fall apart in interesting ways.

Let's start with what everyone knows. California's top marginal income tax rate is 13.3%, which kicks in at $1,354,550 for single filers in 2026. That's higher than New York (10.9%), New Jersey (10.75%), or any other state you can name. If you're a tech executive pulling down a seven-figure salary, California absolutely hammers you. There is no universe in which you're better off, tax-wise, living in San Francisco instead of Miami. The math is brutal and it's not even particularly close.

But here's the thing about progressive tax brackets that most people forget the moment they see that 13.3% number: you don't pay your top marginal rate on all your income. You pay it only on the dollars above that threshold. A single filer earning $100,000 in California in 2026 pays 1% on the first $10,754, then 2% on the next chunk, and so on up the ladder. When you actually run the numbers through California's nine separate tax brackets, that person's effective state income tax rate is around 4.5% — not 13.3%, not even close to 13.3%. They're paying about $4,500 in state income tax on their $100,000, which is not nothing, but it's also not the apocalyptic tax burden that shows up in headlines.

Now take someone earning that same $100,000 in Texas. Zero state income tax. They save the full $4,500, right? Not exactly. Because Texas funds its state government somehow, and that somehow is primarily through property taxes and sales taxes that are higher than almost anywhere else in the country. The statewide sales tax is 6.25%, but local jurisdictions pile on top of that, and in most major cities you're paying 8.25% on nearly everything you buy. In California, the statewide rate is 7.25%, and it goes up to 10.25% in some cities, so California's not winning any awards here either — but the difference is smaller than you'd think. Meanwhile, Texas property tax rates average around 1.6% of a home's value annually. In California, Proposition 13 caps property taxes at 1% of assessed value, plus a maximum 2% annual increase. If you own a home in Texas worth $400,000, you're paying about $6,400 a year in property taxes. The same home in California, assuming you bought it recently, would cost you $4,000.

So now our $100,000 earner in Texas has saved $4,500 on state income tax but is paying an extra $2,400 on property taxes, and they're probably spending a few hundred more on sales tax depending on their consumption patterns. The gap is narrowing. It's still better to be in Texas at this income level, but it's not "buy a boat with your savings" better. It's more like "nice dinner out once a month" better.

And here's where it gets weirder: for people earning less than about $50,000, California's tax burden can actually be lower than Texas once you account for everything. A single person earning $40,000 in California pays about $850 in state income tax — roughly 2.1% effective rate. But they're protected somewhat from regressive consumption taxes by the sheer fact that they're not consuming that much. In Texas, that same person pays zero state income tax but gets hit with the same 8.25% sales tax as everyone else, and if they're renting, their landlord's property tax burden is baked into their rent. The Texas Comptroller's office has estimated that the bottom 20% of earners in Texas pay about 13% of their income in state and local taxes. In California, that figure is closer to 10.5%. This is the opposite of what you'd expect from reading headlines about California being a high-tax hellscape, but it's right there in the data. Regressive tax systems are regressive precisely because they don't care how much you earn.

I built the SalaryHog calculator partly to figure out this exact question for myself — not just "what's the tax rate?" but "what actually happens to my paycheck, line by line, after everything gets subtracted?" Because the federal tax system is the same everywhere, the interesting variations are all at the state and local level, and those variations are not intuitive. You cannot look at a top marginal rate and extrapolate what your life will actually cost. You have to run the numbers for your specific situation, and even then you're probably missing something.

The Part Where You Make Enough to Actually Hate California

There is, of course, an income level where California becomes indefensible from a pure tax perspective, and that level is somewhere around $200,000 for a single filer. Above that threshold, you're paying California's 9.3% rate on a significant chunk of your income, and by the time you're earning $400,000 or $500,000, you're well into the 10.3% and higher brackets. At $500,000, you're paying something like $40,000 to $45,000 in state income tax. Move to Texas or Florida and that number becomes zero. The property tax and sales tax differences don't come close to making up that gap. You are unambiguously better off leaving, and plenty of people do exactly that.

But here's what's strange: even at higher income levels, the comparison isn't always as simple as California versus no-income-tax states. Take Washington State, which also has no income tax. Sounds great, right? Except Washington has a capital gains tax now, and it has some of the highest sales taxes in the country — over 10% in Seattle. Or look at New Hampshire, which has no income tax on wages but does tax interest and dividends, and has extremely high property taxes to compensate. If you're a high earner whose wealth comes from investments rather than salary, New Hampshire might actually cost you more than California, depending on your portfolio.

The thing is, states need money. That's not a political statement, it's just arithmetic. They need to fund schools, roads, courts, prisons, parks, all the infrastructure that makes a state functional. They can get that money from income taxes, property taxes, sales taxes, excise taxes, corporate taxes, or some combination thereof. No state has figured out how to run on vibes alone. So when a state advertises that it has no income tax, what it's really saying is: we're getting the money some other way. Sometimes that other way is oil revenue, like in Alaska. Sometimes it's tourism and gambling, like in Nevada. And sometimes it's just squeezing it out of property owners and consumers, like in Texas.

This is why the question "which state has the lowest taxes?" is almost meaningless without specifying for whom. A retiree with a paid-off house and investment income has a completely different tax profile than a young renter earning a salary. A family with three kids has different deductions than a single person. Someone who owns property benefits from Prop 13 in California in ways that a renter never will. The optimal state for taxes is not a universal constant — it's a function of your income, your expenses, your assets, and your life situation.

The Part Where Nothing Makes Sense

Here's a fun example that breaks everyone's brain: New York City. New York State has a top marginal rate of 10.9%. New York City adds another 3.876% on top of that for residents. So if you're a high earner living in Manhattan, you're paying up to 14.776% in combined state and local income tax — higher than even California. And yet, people still live there. Lots of people. Very wealthy people. People who could absolutely afford to move to Miami or Austin or anywhere else with lower taxes, and they just... don't.

Part of this is that people are not perfectly rational economic actors. They have families, friends, jobs, preferences, attachments to place. But part of it is also that the tax difference, even at high incomes, is not always life-altering once you account for everything else. If you're earning $800,000 a year in Manhattan, you're paying maybe $100,000 in state and local income tax. If you moved to Florida, you'd save that $100,000. But you'd also have to live in Florida, which depending on your preferences might or might not be worth $100,000 a year. And if your job or your industry is concentrated in New York, you might not be earning $800,000 in Florida. You might be earning $600,000, or you might be unemployed, or you might be earning the same amount but spending it all on flights back to New York for meetings.

This is the part of the tax conversation that never makes it into the headlines. Taxes are not the only variable. They're not even always the most important variable. Cost of housing, cost of childcare, quality of schools, commute times, availability of jobs in your field, proximity to family — all of these things have dollar values attached to them, even if they don't show up on a tax form. I know someone who moved from San Francisco to Denver to save money and then spent an extra $15,000 a year on flights back to the Bay Area for work and to see friends. The tax savings were real. The net financial benefit was approximately zero.

And this is before you get into the really complicated stuff, like the fact that California offers more generous state-level deductions and credits for certain expenses, or that some cities and counties within high-tax states have their own tax rules, or that if you're self-employed the calculation changes entirely because of how business taxes work. The SalaryHog calculator tries to account for as much of this as possible, but even then it's a model of reality, not reality itself. Real life has too many variables.

What This Actually Means

So what's the point of all this? Is California a high-tax state or not? Yes. Obviously yes. It has the highest top marginal income tax rate in the country and it's not shy about using it. If you're a high earner, you are paying more in state income tax than you would almost anywhere else, and if you move to a no-income-tax state, you will save a lot of money. That part is not complicated.

But the idea that California is the highest-tax state for everyone, at every income level, in every situation, is just wrong. It's wrong for low earners who benefit from progressive taxation. It's wrong for middle earners who might come out roughly even once you account for property and sales taxes. It's even wrong for some high earners depending on what their income looks like and where it comes from. The story is more complicated than the headline, which is maybe the most predictable thing I could possibly say, but it's also true.

And maybe the real lesson here is that we should stop talking about state taxes as if they're a single number that applies uniformly to everyone. They're not. They're a system, and systems behave differently depending on what you feed into them. California's system punishes high earners and goes relatively easy on low earners. Texas's system is the opposite. Neither approach is objectively right or wrong — they're just optimized for different outcomes and different definitions of fairness. But if you're trying to figure out where to live based on taxes, you can't just look at the top marginal rate and call it a day. You have to run your own numbers, with your own income, your own expenses, your own situation. Anything else is just guessing based on someone else's math.