Texas is not a low-tax place. It’s a high local-tax and low state-tax state. The absence of a state income tax gives us the illusion of living in a low-tax state.

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Reader Steven Alexander, transplanted to Texas from California, provided me a good way to understand California vs. Texas taxes with the following example:

Consider a Texas family with a $50,000 income that purchases a modest $150,000 house. Their 20 percent down payment would be $30,000, which we could imagine is nearly all of their personal net worth. Now consider that the family will pay a 2.7 percent property tax, or $4,050, on the house. This Texas family in this scenario would be paying 8.1 percent of its annual income on property taxes every year. Because $30,000 is their net worth, this family is also paying an annual 13.5 percent tax on its wealth even with a modest home. This is a severe wealth and income tax penalty in Texas for the modestly compensated.

A family living in California with similar circumstances would pay 1 percent of its home value in property taxes ($1,500) and 4 percent in state income taxes ($2,000), for an all-in lower combined tax than the Texas family paying $4,050.