California Governor Gavin Newsom recently drew criticism for pointing out something that often gets lost in the noise of political talking points: despite California’s reputation as a “high-tax” state, millions of working- and middle-class Californians actually pay less in taxes than residents of so-called low-tax states like Texas and Florida. Contrary to the outrage, his statement is backed by hard data and decades of economic policy research.
Let’s unpack what he said, why it’s accurate, and what it tells us about the deeper truth behind “low-tax” state myths.
Top Three Takeaways from the Article:
California has one of the most equitable tax systems in the U.S. – While it has a high state income tax, the overall burden is distributed more fairly across income levels, with lower-income residents paying a smaller share compared to regressive systems in Texas and Florida.
Texas and Florida shift the tax burden onto low- and middle-income families – Without state income taxes, these states rely on high sales and property taxes, which disproportionately affect poorer residents.
Governor Newsom’s tax comparison is supported by data – Studies from the Institute on Taxation and Economic Policy confirm that California’s tax system is more balanced and generates more revenue for public services without overburdening the working class.
What Governor Newsom Said
Governor Newsom made several claims:
- 80% of Californians pay about average taxes.
- 40% of Californians pay less in taxes than people in Texas or Florida.
- Texas and Florida tax their lowest-income residents more than California taxes its wealthiest.
At first glance, this seems counterintuitive. After all, California has a state income tax, one of the highest top marginal rates in the country, while Texas and Florida don’t have one at all. So how can residents of those states possibly pay more taxes?
Simple: You have to look at the full tax picture, not just income taxes.
Income Taxes Are Only Part of the Story
Yes, California has a progressive income tax system, meaning higher earners pay a higher percentage of their income. But Texas and Florida have to raise revenue too, they just do it through regressive taxes that hit low- and middle-income earners harder. These include:
- High sales taxes on essentials like groceries and clothing
- Higher property tax rates, particularly in Texas, which are roughly double those in California
- Fees and fines that disproportionately affect the working poor
When you add up all state and local taxes, it turns out that California’s system is one of the most equitable in the nation, while states like Texas and Florida shift the tax burden downward.
The Data Doesn’t Lie
The nonpartisan Institute on Taxation and Economic Policy (ITEP) conducted a comprehensive study of state tax systems. Their findings?
- California has the most equitable tax system in the country
- Texas ranks near the bottom, with one of the most regressive systems
- Florida also ranks as one of the worst states for tax fairness
Why? Because in Texas and Florida, the poorest 20% of households pay a higher percentage of their income in taxes than the richest 1%. In California, the system is much more balanced, thanks to refundable tax credits, exemptions for low-income earners, and higher rates for the wealthy.
So when Newsom said Texas taxes its lowest-income workers more than California taxes its wealthiest, he was right, statistically and economically.
The “High Cost of Living” Distraction
Some critics deflected Newsom’s points by bringing up California’s cost of living. While it’s true that California is expensive, ranked third nationally behind Hawaii and Massachusetts, cost of living is a separate issue from tax fairness. High housing costs in California are a real challenge, but they don’t invalidate Newsom’s claim about tax equity.
In fact, California’s progressive tax structure helps offset the high cost of living for low and middle-income residents, through earned income tax credits, child tax credits, and social programs funded by robust revenue from top earners.
California’s System Funds Services Other States Can’t Match
Another important point: California’s tax system doesn’t just redistribute fairly, it funds things that residents in other states wish they had, like:
- World-class public universities and research institutions
- Expansive healthcare programs for low-income residents
- Aggressive climate policy and environmental protections
- Public transportation systems
- Progressive wage and labor protections
Texas and Florida keep their tax rates low, but at a cost: underfunded public services, poor health outcomes, underperforming schools, and limited safety nets.
Governor Newsom’s remarks were not only accurate, they were necessary. The myth of the “low-tax paradise” in Texas and Florida ignores how those states raise money and who they raise it from. When you zoom out and look at the full picture, California’s tax system doesn’t just raise more revenue, it does so more fairly, placing more of the burden on those most able to pay, and protecting those who are struggling to get by.
Critics can try to twist the narrative, but the facts are clear: California isn’t just a high-tax state, it’s a smart-tax state. And that makes all the difference.