Nearly 94,000 former Californians relocated to Texas between 2022 and 2023, continuing what many have dubbed the great California exodus. The promise is simple: escape the Golden State’s punishing income taxes and embrace the freedom of a no-tax haven in the Lone Star State. Sounds like a no-brainer, right? Well, here’s the thing. High-income Californians continue to favor states without income taxes, with all of the net outflow of high-income earners now landing in no-tax states. Yet when you look beyond the marketing hype and dive into the actual numbers, something unexpected emerges. That Texas dream might be costing high earners more than they ever imagined.
The Property Tax Trap Nobody Warns You About
Texas’ property tax rate is at 1.9 percent, and with an average housing price in Texas of only around $146,000, the average property taxes paid on the house are less than $2,800. That sounds reasonable, especially compared to California’s astronomical home prices. The counties in Texas with the highest effective property tax rates are El Paso County at 1.94 percent, Brazoria County at 1.82 percent, and San Patricio County at 1.82 percent. The issue? If you’re a high earner relocating from California, you’re not buying the median Texas home. You’re purchasing something that reflects your income level, and that’s where the math starts to hurt.
Some states with high property taxes, like New Hampshire and Texas, rely heavily on them instead of other major tax categories, which often involves greater devolution of authority to local governments. This means Texas needs to fund everything through property taxes, which California covers through income taxes. Let’s be real, when you’re dropping half a million dollars or more on a home in Austin or Dallas, that nearly two percent property tax rate becomes a serious annual expense that never goes away.
When Middle-Class Texans Actually Pay More Than Californians
Here’s where things get really surprising. In Texas, the middle 20 percent of income earners making between $35,800 and $56,000 pay 9.7 percent in state and local taxes, in contrast to middle-income Californians earning between $39,100 and $62,300, who only pay 8.9 percent. I know it sounds crazy, but multiple studies have confirmed this counterintuitive reality. Though Texas has no state-level personal income tax, it does levy relatively high consumption and property taxes on residents to make up the difference, resulting in a higher effective state and local tax rate for a median U.S. household at 12.73 percent than California’s 8.97 percent, according to WalletHub’s comprehensive analysis.
ITEP ranked Texas as the second-most regressive tax state, behind Washington State, due to low-income taxpayers bearing a disproportionate share of the tax burden, while California was ranked the most progressive tax state. The takeaway? Texas balances its budget on the backs of everyone equally, while California asks more from those who earn more.
The Hidden Sales Tax Burden
Texas makes up for what it misses by not collecting income tax by slamming its residents with relatively high property and consumption taxes. Every purchase you make in Texas chips away at your supposed tax savings. Think about your daily life for a moment. Groceries, dining out, home repairs, furniture, electronics, clothes. WalletHub estimates Sales and Excise Taxes of $4,591 for the theoretical median household in Texas versus only $3,292 in California, but sales tax rates are generally lower in Texas than in California. The paradox exists because Texans simply consume more taxable goods to compensate for the lack of income tax revenue.
Consider this: Gasoline taxes are much higher in California at 53.9 cents per gallon compared to 20 cents per gallon in Texas, and cigarette taxes in California are double those in Texas. Still, when you factor in everything else, Texas squeezes revenue from consumption in ways that add up fast. The state has to fund roads, schools, and public services somehow.
Where Rich Californians Actually Save (And Where They Don’t)
The top 1 percent of earners in Texas, making $617,900 or more, pay 3.1 percent of their income, in contrast to top earners in California at $714,400 or more who pay 12.4 percent. This is the income bracket where moving to Texas genuinely makes financial sense. Combined with federal income taxes, high-income earners living in the State of California can face the top marginal tax rate of over 50 percent, though only about 60,000 households in California are paying this rate. For these ultra-wealthy individuals, the move pays off substantially.
However, while California’s property tax rates are low, its home values are much higher than the national median figure, and when comparing effective rates with state-adjusted figures, California and Texas actually end up having fairly similar tax burdens: Texas at 11.8 percent, and California at 11.4 percent. The gap narrows considerably when you account for real estate values and lifestyle costs. Honestly, for many high earners, the difference isn’t as dramatic as the headlines suggest.
The Real Cost of Living Shock
California’s cost of living ranks among the highest nationwide, with the state’s index reaching 137.6 as of 2025, compared to 92.5 in Texas, according to Data Pandas. That spread looks impressive until you start shopping in Austin, Dallas, or Houston’s desirable neighborhoods. Common reasons for Californians leaving their home state include the high cost of living, crime, politics, taxes, pollution, and traffic, painting a broader picture than just taxes alone.
The California population drain is mainly due to people’s desire to live in more affordable places, with several studies finding that the cost of housing alone is a key reason for people to leave the Golden State, though California is among the top five states with the highest overall cost of living in the country. Yet when wealthy Californians move to desirable Texas cities, they discover that everyone else had the same idea. Home prices in Austin have skyrocketed, and suddenly, those tax savings get eaten up by inflated real estate costs in the most livable areas.
The Billion-Dollar Migration Miscalculation
In 2021, fleeing California residents took billions of dollars in personal income to other states, with the Golden State losing $5.6 billion in residents’ taxable income to Texas alone, $4.4 billion to Nevada, $3.5 billion to Florida, and $2.6 billion to Arizona. These staggering figures suggest a massive wealth transfer. Between 2020 and 2021, there was a net of over 27,300 fewer tax returns in California that reported an adjusted gross income of at least $200,000, according to the Tax Foundation, citing IRS migration data.
But here’s what rarely gets reported: many eventually return. Job opportunities were partly driving the influx of Texas transplants back to California, as companies were moving back to in-person work, and many employees who worked remotely during the 2020 pandemic were returning to California. The grass isn’t always greener. Some discover they left stable, high-paying jobs for slightly lower taxes but worse career prospects. Others miss California’s culture, weather, or simply realize the financial benefits were oversold.
What the Numbers Really Tell Us
Despite Texas and Florida’s reputations for having low taxes, California has lower taxes for its bottom 40 percent of earners than either Texas or Florida, and in the middle of the income scale, these three states’ overall tax rates are all within 1 percentage point of each other. It’s only at the very top where Texas delivers genuine savings. Of the nine states without a state income tax, five have higher effective state and local tax rates on the median income than California, according to WalletHub’s calculation.
While many people would point to states without a state income tax as “low tax,” it’s largely people on the upper end of the income spectrum who get the most out of it, with California, New York, and DC having programs like the Earned Income Tax Credit which send money to low and middle income people, while states like Texas don’t have that. The system in Texas benefits the wealthy at everyone else’s expense. For high earners not quite in that top one percent stratosphere, the supposed tax paradise might actually be costing them more than staying put. The California tax narrative deserves more scrutiny than it typically receives. What’s your take on this whole migration debate? Have you crunched the numbers for your own situation, or do you know someone who moved and regretted it?
