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Tax burdens - California vs Texas

bernorange

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bernorange

bernorange 8,348

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WalletHub recently published an analysis of tax burdens by state that included some surprising findings: most notably, that Texas state and local governments impose heavier taxes on median earners than their California counterparts. Of the fifty states plus DC, the Golden State had the 12th lightest tax burden, while Texas ranked 41st.
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But the WalletHub analysis seems to contradict a Tax Foundation burden ranking which placed the Golden State and Lone Star State 46th and 6th respectively.

The difference between WalletHub and the Tax Foundation is partially explained by a different focus. The Tax Foundation is measuring overall tax burden while WalletHub is trying to estimate the impact of taxes on a median family. Since California’s personal income tax is highly progressive, with the burden falling more on high income taxpayers, it is not surprising that WalletHub would come to a different conclusion.

But could it really be true that California taxes average families less than Texas does? After looking through the underlying numbers, I do not think so. As we dive through the numbers, I will explain.
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More:

https://www.cato.org/blog/are-taxes-really-lower-california-texas

It's all about the nuance.

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Biff Tannen

Biff Tannen 45,499

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This seems to be the most pertinent part of the article.  Especially for the large  population centers of each state.

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WalletHub found an even larger gap for real estate taxes, with the burden in Texas more than double that of California. This discrepancy reflects both an element of truth and a distortion.

California’s Proposition 13 limited property tax rates to 1% plus add‐ons for voter approved bonds and parcel taxes. Although these add‐ons can mount up, the total tax bite rarely if ever exceeds 2% of assessed value.

Texas, by contrast, has no similar property tax limitation. Counties, cities, school districts and special districts levy taxes independently, and homeowners must pay the combined rate, which can be quite steep. In the small north Texas community of Darrouzett, four local tax levies totaled an eye‐watering 4.2% of assessed value in 2022 (according to State Controller data available here).

But there are two caveats to consider. First, home values in Darrouzett are relatively low: a three‐bedroom house is on the market for $139,000. Second, the homeowner’s exemption plays a role. In California, homeowner occupants can deduct $7,000 from the assessed value of their property before the tax rate is applied. In Texas, the exemption is $40,000 for school districts and variable for other taxing entities.

These factors, especially the difference in home prices, largely offset the tax rate differences between Texas and California. The Zillow Home Value Index is 2.5 times higher in California than it is in Texas. In fact, the median US home value WalletHub used, $244,900, is virtually unheard of in most of California.

All that said, Texas officials have started to recognize that property taxes are becoming onerous. Both the House and Senate have unveiled plans to reduce property tax bills and limit future growth. So, although the WalletHub ranking appears to be misleading overall, it nonetheless highlights a reasonable concern about Lone Star State taxes.

 

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TwiceHorn

TwiceHorn 31,283

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Interesting semi-related tidbit.  For all the talk about freedumb in Texas, some group did an analysis of Texas statutory law for mandatory language such as "shall," and, by that measure, Texas had the most mandatory body of statutory law in the nation.

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14 minutes ago, Sawbonz said:

The only way you come out ahead in Texas is if you have a very high W2 income and live in a very modest home

Property taxes have definitely dissuaded me from moving up. I've considered both buying a larger home and toyed with buying a spot to escape to out of town. The property tax burden just makes the math not make sense.

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Nice Guy Eddie

Nice Guy Eddie 13,414

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22 minutes ago, jimmyjazz said:

Looks like neither state has a "progressive" tax burden, but Texas is absolutely REgressive.  Go figure.

Texans don't want to be a state that rewards you for being poor. Haven't you been paying attention? :)

With the rise in property values, the burden by income level will be shifting more to the wealthier side. Hence why we're hearing from the state legislature that we need to provide more property tax relief to shift the burden back to it's more natural state.

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YGIFS

YGIFS 19,449

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56 minutes ago, David Dennison said:

The sad irony is that a state income tax would probably lower the tax burden of the bottom and middle Texans.

Oh well.

 

Yep, this.  I forget how much of Texas is economically dying sometimes until I drive far enough to the north or east of Austin.  They keep voting for the same stupid shit because their property values are actually declining.  My property taxes and home equity are exploding, I forget how people in exurban/rural Texas are eating a bag of shit right now that they've been told is the way to punish blue urbanites.  Enjoy your boarded up main street and shitheap homestead then fuckers.

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Biff Tannen

Biff Tannen 45,499

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5 hours ago, YGIFS said:

Yep, this.  I forget how much of Texas is economically dying sometimes until I drive far enough to the north or east of Austin.  They keep voting for the same stupid shit because their property values are actually declining.  My property taxes and home equity are exploding, I forget how people in exurban/rural Texas are eating a bag of shit right now that they've been told is the way to punish blue urbanites.  Enjoy your boarded up main street and shitheap homestead then fuckers.

The only small town I can think of that has started to buck this trend is Coleman.  Haven't spent time there, but drove through it in the past few years, and they've got a craft brewery/pizza joint and some actual economic activity, so it seems.

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Gil Bang

Gil Bang 25,898

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9 hours ago, Biff Tannen said:

This seems to be the most pertinent part of the article.  Especially for the large  population centers of each state.

 

This person doesn't understand Prop 13 even a little bit. 

Here's the critical part of Prop 13:

Prior to 1978, real property was appraised cyclically, with no more than a five-year interval between reassessments. Since property values were systematically reviewed and updated, assessed values were usually kept at or near current market value levels. In contrast, under Proposition 13, properties are reassessed to current market value only upon a change in ownership or completion of new construction (called the base year value). In addition, Proposition 13 generally limits annual increases in the base year value of real property to no more than 2 percent, except when property changes ownership or undergoes new construction. Essentially, Proposition 13 converted the market value-based property tax system to an acquisition value-based system.

Plenty of folks in CA live in a house that's worth a million, but pay property taxes on an assessed value of far, far less. 

Furthermore, if you are over 55, your property tax bill is portable.  

Here's a very dumb-downed hypothetical:

Mr. and Mrs. Smith had 4 kids, and purchased a large home for $100,000 30 years ago.  They are still paying property taxes based on that original purchase price, but all the kids are gone, and they don't need this big house.  They sell for $1,000,000, and "downsize" to a condo in a retirement community, which they purchase for $500,000.   The Smiths get the $500,000 capital gains exemption for the profit on the house, and they continue to pay their original property tax bill, based not on the $500,000 they just paid for the new place, but on the $100,000 that they paid for the old place. 

 

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Goredho

Goredho 17,349

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21 hours ago, FirstTimeCaller said:

Property taxes have definitely dissuaded me from moving up. I've considered both buying a larger home and toyed with buying a spot to escape to out of town. The property tax burden just makes the math not make sense.

Buy rural land, lease it for grazing to get an agriculture exemption and put a camper or mobile home on it so that there is no dwelling for assessment.  The taxes on your spot to escape out of town will be relatively cheap. 

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CooterBrown

CooterBrown 17,913

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Buy rural land, lease it for grazing to get an agriculture exemption and put a camper or mobile home on it so that there is no dwelling for assessment.  The taxes on your spot to escape out of town will be relatively cheap. 

A trailer in the middle of a cow shit littered pasture. Sign me the fuck up.
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On 3/28/2023 at 10:00 AM, Sawbonz said:

The only way you come out ahead in Texas is if you have a very high W2 income and live in a very modest home

I don’t see how this is possible. Prove me wrong. 

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David Dennison

David Dennison 18,661

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16 hours ago, Biff Tannen said:

America in general, but yes, Texas is a part of America.

The greatest trick Republicans ever pulled was convincing Americans that poor people receive more help from the government than people who don't need it. Democrats like Bill Clinton helped them do it.

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Goredho

Goredho 17,349

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2 minutes ago, CooterBrown said:


A trailer in the middle of a cow shit littered pasture. Sign me the fuck up.

LOL, or don't?  If you have a well, septic and electricity, it will be as comfortable as your house.  This is just a way I've seen someone own and enjoy acres of land relatively cheaply in Texas: 75 acres, about half of it lakes full of bass and panfish, with a place for the whole family to stay that is air conditioned, has working water, shower & shitter, and costs less than $1000 a year in property taxes because ag exemption and no permanent dwelling.  A portable electric fence with solar charge box would keep your "yard" around the camper free of cow shit.

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wildcat09

wildcat09 29,260

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On 3/28/2023 at 10:24 AM, Foosters said:

data from 2018

rzmI8Uo2XBqEP4Rcbkyrpoq48SgqwKM-XVtOmfNUrRrLpnjnJpUGo-oUBKe3oXtnQ06HpE-rctUJKV1_9Hy2oWISYQFp9iJfLsDSxBkNcXeHCLVMqpQIoVmFi0CE0ezZJODW8Iw6CfZukaVOPL1bgA

This doesn't even account for the most regressive local taxes, which are traffic tickets, fines for nonpayment, court costs, etc. In smaller towns in Texas and in many other states, revenue from those sources make up a pretty substantial portion of local budgets.   They're absolutely taxes by any reasonable definition and are all levied disproportionately against poor people.

Edited by wildcat09
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TwiceHorn

TwiceHorn 31,283

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7 minutes ago, wildcat09 said:

This doesn't even account for the most regressive local taxes, which are traffic tickets, fines for nonpayment, court costs, etc. In smaller towns in Texas in many other states, revenue from those sources make up a pretty substantial portion of local budgets.   They're absolutely taxes by any reasonable definition and are all levied disproportionately against poor people.

And don't forget, poors/renters pay property taxes, on behalf of property owners, without getting a deduction.

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Sawbonz

Sawbonz 27,437

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1 hour ago, Porterhouse said:

I don’t see how this is possible. Prove me wrong. 

The graph posted above shows you pay more in Texas than Cali as percentage of income if you are bottom 80%.
 

My comment was based on the cap on property tax deduction of 10k but on further reading I see the cap applies to state and local income taxes as well so I guess that is a wash. Either way fuck trump

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Nice Guy Eddie

Nice Guy Eddie 13,414

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1 hour ago, wildcat09 said:

This doesn't even account for the most regressive local taxes, which are traffic tickets, fines for nonpayment, court costs, etc. In smaller towns in Texas in many other states, revenue from those sources make up a pretty substantial portion of local budgets.   They're absolutely taxes by any reasonable definition and are all levied disproportionately against poor people.

 

1 hour ago, TwiceHorn said:

And don't forget, poors/renters pay property taxes, on behalf of property owners, without getting a deduction.

In dealing with some less well-off friends and even relatives, they always seem to be supporting someone in the Texas corrections system. Now situation is entirely with the convicted criminal and not the state but the state puts a financial burden on the people that love or support the criminal. You basically have to pay so the convict can buy basic necessities and then there are the constant fees when they get paroled.  And while in theory, the excon should absolutely cover those fees, it's invariably poor family members who do so because the excon is not able able to financially do so themselves.

My point being is that the state (& us taxpayers) love to burden people with fees that are the same for anyone utilizing said service. These slam poorer people.

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Biff Tannen

Biff Tannen 45,499

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1 hour ago, Goredho said:

LOL, or don't?  If you have a well, septic and electricity, it will be as comfortable as your house.  This is just a way I've seen someone own and enjoy acres of land relatively cheaply in Texas: 75 acres, about half of it lakes full of bass and panfish, with a place for the whole family to stay that is air conditioned, has working water, shower & shitter, and costs less than $1000 a year in property taxes because ag exemption and no permanent dwelling.  A portable electric fence with solar charge box would keep your "yard" around the camper free of cow shit.

I mean to each their own I guess.

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wildcat09

wildcat09 29,260

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4 hours ago, Nice Guy Eddie said:

 

In dealing with some less well-off friends and even relatives, they always seem to be supporting someone in the Texas corrections system. Now situation is entirely with the convicted criminal and not the state but the state puts a financial burden on the people that love or support the criminal. You basically have to pay so the convict can buy basic necessities and then there are the constant fees when they get paroled.  And while in theory, the excon should absolutely cover those fees, it's invariably poor family members who do so because the excon is not able able to financially do so themselves.

My point being is that the state (& us taxpayers) love to burden people with fees that are the same for anyone utilizing said service. These slam poorer people.

Yeah, that shit sucks but in that case as you point our we're talking about people who've been convicted of crimes.  That's a pretty small subset of the total population. What I'm talking about moreso are the standard practices you'll find in most smaller municipalities (and plenty of larger ones too) like Ferguson. What you'll typically find is a pattern of aggressively targeting poor and minority people (often with illegal stops) for basic municipal code and traffic violations that we all commit all the fucking time, combined with municipal court practices designed to make it hard for those people to ever pay off their fines. There are plenty of municipalities where around half their annual revenues come from these payments, which are compulsory levies and failure to pay them lands you in jail (with much less due process than you would get for charges for failing to pay your federal income taxes).  Those are taxes by any definition of the word "tax" that doesn't depend on using the word in its own definition, but if you're a white guy over the age of 30 driving a BMW or a Lexus you're going to get a de facto waiver from them (unless you REALLY drive like an asshole). 

Edited by wildcat09
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fattyflattie

fattyflattie 4,636

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1 hour ago, Sawbonz said:

The graph posted above shows you pay more in Texas than Cali as percentage of income if you are bottom 80%.
 

My comment was based on the cap on property tax deduction of 10k but on further reading I see the cap applies to state and local income taxes as well so I guess that is a wash. Either way fuck trump

I'm not sure the bottom 80% is an ideal spot to be in regardless where you reside.  Cali, NY, OK, or TX. 

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1 hour ago, Sawbonz said:

The graph posted above shows you pay more in Texas than Cali as percentage of income if you are bottom 80%.
 

My comment was based on the cap on property tax deduction of 10k but on further reading I see the cap applies to state and local income taxes as well so I guess that is a wash. Either way fuck trump

I’m far right on graphic. I pay $28k annually in property tax. 

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Gil Bang

Gil Bang 25,898

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10 hours ago, CooterBrown said:


A trailer in the middle of a cow shit littered pasture. Sign me the fuck up.

So, a LOI to aggy?

8 hours ago, Nice Guy Eddie said:

 

In dealing with some less well-off friends and even relatives, they always seem to be supporting someone in the Texas corrections system. Now situation is entirely with the convicted criminal and not the state but the state puts a financial burden on the people that love or support the criminal. You basically have to pay so the convict can buy basic necessities and then there are the constant fees when they get paroled.  And while in theory, the excon should absolutely cover those fees, it's invariably poor family members who do so because the excon is not able able to financially do so themselves.

My point being is that the state (& us taxpayers) love to burden people with fees that are the same for anyone utilizing said service. These slam poorer people.

I knew somebody in that situation, and even  the phone bills were crazy.  Phone calls from prison are like 3 bucks a minute.

2 hours ago, Porterhouse said:

I’m wondering if I can live in Cali. Genuine interest

I'm a San Diego Realtor.  PM me, and I will help you all I can, no obligation to you at all. 

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Dahobbs

Dahobbs 17,449

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7 hours ago, fattyflattie said:

I'm not sure the bottom 80% is an ideal spot to be in regardless where you reside.  Cali, NY, OK, or TX. 

What? I'm hoping you don't understand what bottom 80% means. Otherwise, this is a crazy out of touch statement along the lines of this:

Confused Arrested Development GIF

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