Some of my family lives in NW Iowa (Steve King's congressional district) and I live in Southern California. They sometimes ask me how I survive amidst all the taxes and regulations of the Peoples Republic of California. So I thought it would be a fun exercise to compare my tax situation to theirs. For the purpose of this exercise, we will use my current situation which is retired, living in a paid off house, with an income of $50k per year (AGI is $43K per year).
Let's start with income tax. Everyone knows CA income tax is high. The top marginal rate is 13%! But that is for people who have incomes above $1 million. What if you are a married couple with an AGI of $43K? Then the top marginal rate is 4.0%. In Iowa the rate is 6.8% for that income.
How about property taxes? CA is complicated. The rate is 1% of assessed value plus other assessments for local bonds. Typical tax rate for a new purchase can range form 1.1 to 1.6 %. But future tax increases are limited to no more that 2% a year. Thus people who have owned their homes for a long time pay a much lower tax rate. The average effective property tax rate in CA is .81%. I pay just under $4K per year on house that Zillow tells me is worth around $700K (about a .6% rate). My Iowa relatives pay a simple 1.5% of assessed value. Granted, I could buy a similar house in Iowa for one third the cost, so the actual tax bill would come out about the same.
How about sales tax? No doubt about it, Iowa beats California hands down. Iowa's sales tax is 6%. California's is, you guessed it, complicated. The state rate is 6% but there are county and local taxes on top of that so it can vary from 7.5 to close to 10% depending where you are in CA. My hometown is 9.5%. On the bright side, sales tax does not apply to food and I really don't spend much on stuff.
There are other taxes like gas tax that are higher in CA but I don't think much about them because, outside of the annual out of state road trip, I don't drive very much.
There are other costs that vary between states. I pay very little for heating and cooling (yay solar!) while they have to heat all winter long and run the AC most of the summer. I pay more for insurance and they pay more for fresh produce and some consumer goods.
All in all, I think it cost me less to live in California than it would to live in Iowa. I know what some of you are probably thinking, that my situation is unique and does not apply to most people. No argument there. Also, my low tax rates are only possible because CA rates favor low income families at the expense of high income earners or that old home owners are being subsidized by new homeowners. Again no argument form me. I'm not even going to debate whether progressive tax rates are more or less fair than flat tax rates.
I don't know if there is a point to this exercise other than it's a good idea to always challenge conventional wisdom, especially if it is politically motivated.