Newsom: Texans pay more taxes than Californians. He is right?

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Governor Gavin Newsom recently proclaimed that “95% of Texans pay higher taxes than Californians.”

But is this true? Some Sacramento Bee investigations conclude that, well, Newsom’s statement cannot be independently verified.

Asked to provide a source for the assertion, Newsom’s office cited a 2018 study by the Institute of Taxation and Economic Policy, a liberal-minded group.

But the group’s spokesman, Jon Whiten, told The Bee: “We don’t compute a specific percentage of Californians who pay less/more taxes than Texans.” He praised California for having the fairest tax system in the country.

Newsom made his point at his budget press conference on Tuesday.

“Our tax rates, again, are lower than the state of Texas,” the governor said. “I just want to remind everyone that 95% of Texans pay higher taxes than Californians.”

Newsom noted that while the state’s tax rates on the very rich are among the highest in the country, “not everyone lives in this rarefied world.”

Less income, less taxes

The ITEP report found that California had the fairest tax system in the country and cited Texas as the second most unfair, after Washington.

The study found that “many low- and middle-income families pay lower taxes under California’s moderately progressive tax system than they would under the highly regressive systems used to fund public services in Texas and other more conservative states.”

The state’s tax system is relatively progressive, ITEP said, because of its graduated income tax rates, its additional tax on income above $1 million, and limits on tax breaks for high-income taxpayers.

ITEP found that the richest 1% in Texas pay an average of 3.1% in state and local taxes as a share of income. California’s richest 1% paid 12.4%.

For the top 40% of people earning — those earning $56,000 or more in Texas and $62,100 in California — rates are highest in California, ITEP found.

ITEP has not updated the 4-year-old study, but Whiten said the study’s findings should stand, as none of the states has enacted fundamental tax reform since it was published.

The core of the ITEP finding is that while overall tax collections in California are higher than in Texas, the drastically different ways in which these two states raise revenue mean lower taxes for many California families with moderate incomes.

california vs texas

Other studies have found that Californians, on average, pay more taxes than Texans, though Whiten said these state averages largely reflect California’s higher taxes for wealthy families.

California had the ninth highest tax burden in the country, while Texas ranked 34th in a 2022 survey by WalletHub, a financial services website.

He compared property taxes, individual income tax, and sales and excise taxes as a share of total personal income in the state.

In another study, the Tax Foundation, a Washington-based conservative research group, compared the taxes paid by an individual on $100,000 in suburban Texas and California.

The Texan paid $6,335 – without income tax, $5,027 in property tax and $1,620 in sales tax.

The Californian paid $11,946, including $5,844 in income tax, $5,073 in property tax, and $1,029 in sales tax.

“Texas is a much lower tax state than California, an experience that holds true for most taxpayers at different points along the income spectrum,” said Jared Walczak, vice president of state projects for the foundation.

Unlike the ITEP study, the Tax Foundation analysis did not take into account several lower taxes or the effects of higher taxes paid by companies.

The big difference between the two states is that Texas has no state income tax. California does, and its top rate is the highest state rate in the country.

The two states have roughly comparable sales taxes.

Texas property tax rates are about twice as high as those in California, although Texas homes tend to cost less on average.

Experts note that individual tax comparisons are always difficult. A person’s tax liability depends on a number of variables, including whether he owns a home, his salary, how much fuel he uses when driving, and so on.

In addition, tax laws tend to be complex.

“It’s important to understand that the two states have very different economic profiles and tax systems,” said Chris Hoene, executive director of the California Budget & Policy Center.

Texas is very dependent on natural resources and services and is primarily dependent on property, sales and taxes related to natural resources.

“So state revenues don’t tend to increase as quickly or as much as they do in California in periods of economic growth,” Hoene said, “but they also don’t decrease as quickly or as much during periods of economic downturns. Resource-dependent states also tend to experience economic cycles differently.”

And, said Ray Perryman, an economist based in Waco, Texas, his state has the prospect of huge gains in taxes and royalties from oil and gas.

“The state has seen record levels of production in both, as well as very high prices,” he said. “The state also has large sums of money from the various stimulus programs that have yet to be spent.”

This story was originally published Jan 18, 2023 5am.

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David Lightman is McClatchy’s main congressional correspondent. He has been writing, editing, and teaching for nearly 50 years, with stops in Hagerstown, Maryland; Riverside, California; Annapolis; Baltimore; and, since 1981, Washington.

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