(CALIFORNIA) — Residents of California and New York often pay higher combined taxes—federal plus state and local—than people in states with no state income tax, such as Texas and Florida. That gap comes from state policy choices under U.S. federalism, not from discriminatory rules.
Federal taxes are nationwide; state taxes are optional by design
Federal income tax applies across the United States on the same terms. A worker in San Francisco and a worker in Texas face the same federal brackets, and payroll taxes apply the same way too. No state can exempt its residents from federal income tax.
California and New York add another layer: state income tax. Some places also add local taxes, which is especially visible in New York City. Other states choose a different funding mix and set state income tax at zero.
⚠️ The SALT deduction cap reduces federal tax relief for high-tax states, so state and local taxes often no longer offset federal taxable income as much as they once did.
What “high-tax” looks like in California and New York
High-tax states can be high for different reasons. California is known for a very high top state income tax rate on top earners. New York combines a high state burden with the added bite of city income tax for many New York City residents.
WalletHub’s 2024 analysis of state tax burden and USAFacts 2022 figures on state income taxes help show the difference clearly.
Table 1: Compare state income tax rates and overall burden
| State | Top Income Tax Rate | Local Taxes (if any) | Avg. State Income Tax Paid (2022) | Notes |
|---|---|---|---|---|
| California | 13.3% | Local taxes vary (not a statewide city income tax) | $3,734.82 | 13.3% applies for income over $1 million; plus 1% mental health surcharge (13.6% effective at the top). |
| New York | 10.9% | New York City: 3.078%-3.876% | $4,460.80 | NYC residents can pay state plus city income tax, increasing the combined bill. |
| Texas | No state income tax | Local taxes exist (sales/property) | N/A | Texas relies more on sales and property taxes rather than a wage-based income tax. |
| Florida | No state income tax | Local taxes exist (sales/property) | N/A | Florida also uses sales and property taxes more heavily than income taxes. |
For high earners, stacking federal, state, and local taxes can push effective rates up to 25–27% in many cases. The exact outcome depends on income level, filing status, deductions, and where the person lives and works.
Two different state models: “income-tax heavy” vs “income-tax free”
Tax systems are like choosing how to fund a shared household. One household pays a bigger monthly fee for more included services; another pays a lower monthly fee but more per use. States make similar trade-offs.
Table 2: Tax burden summary by state type
| State Type | Typical Burden Characteristics | Representative States |
|---|---|---|
| High state income tax states | Higher state income tax rates; may include local income taxes; often paired with larger public service spending | California, New York |
| No state income tax states | No wage-based state income tax; state revenue relies more on sales taxes, property taxes, and business taxes | Texas, Florida |
Why the burden can feel heavier in California and New York
A resident in California or New York pays federal income tax like everyone else. Then the state adds its own income tax. After that, local taxes can add more cost, and New York City stands out because it imposes a city income tax of 3.078%–3.876%.
Cost of living can intensify the feeling. Housing in San Francisco is a common example. A bigger share of income may go to rent or a mortgage, leaving less room to absorb taxes.
Middle earners and high earners often notice the gap most. A state income tax applies directly to wages and bonuses, while sales taxes apply only to what you spend. That difference changes the day-to-day feel of take-home pay.
Why this is not discrimination under U.S. law
Discrimination in U.S. law generally means unequal treatment based on protected characteristics (race, religion, national origin, etc.). State tax differences are geographic and apply to residents of the state under the same rules.
Federalism explains why the map looks uneven. States have constitutional authority to raise revenue and choose how to pay for schools, transportation, public health programs, and other services. California and New York chose a progressive income-tax approach, which places more tax on higher earners.
Courts have consistently upheld state taxing power when structured within constitutional limits. People can also relocate to a different state, which matters because state income tax is typically tied to where you live and work.
The SALT cap’s role in the “double tax” complaint
Many taxpayers describe the experience as “paying twice.” The idea is simple: pay federal income tax, then pay state and local taxes on top.
Historically, the federal tax code allowed many filers to deduct state and local taxes (SALT) from federal taxable income. With the SALT deduction now capped, some residents in high-tax states receive less federal relief than they might expect. That policy shift increases the pressure people feel in California and New York.
What immigrants, visa holders, and green card holders should watch
Immigration status does not create a special, higher tax bracket in California or New York. In general, tax rules apply based on factors like residency for tax purposes and where income is earned, not on citizenship.
Still, immigrants, visa holders, and green card holders can feel the impact sharply because relocation decisions often happen early, when budgets are tight. A first apartment in New York City, a new job in San Francisco, or a move to Texas for a similar salary can change net pay dramatically after taxes.
✅ For immigrants and visa holders: assess residency location and its tax impact as part of comprehensive immigration planning.
A practical way to think about it: immigration paperwork sets where you may live and work, while tax policy sets what you keep. Both shape long-term stability.
Why many people stay anyway
High taxes do not automatically mean a bad deal for every household. California and New York also offer job density and high-paying sectors, including technology, finance, entertainment, healthcare, and research. For some workers, higher pay can offset higher taxes.
Public services can be part of the value equation as well. Transit systems, universities, and state programs vary widely by state. Voters decide these trade-offs through state and local elections, and the result can look very different from Texas or Florida.
Planning steps that often matter most
Choosing where to live is not only personal. It is also financial.
Consider these questions before signing a lease or accepting a transfer:
- Will you be taxed as a resident, a part-year resident, or a nonresident in a given year?
- Will your job be located in New York City, creating exposure to city income tax?
- Are you likely to itemize deductions, and how does the SALT deduction cap affect you?
- Does a “no state income tax” state still raise costs through property taxes, sales taxes, or insurance?
Many families run two scenarios:
- One for California or New York, and
- One for Texas or Florida.
The comparison can clarify whether the higher-tax state still produces a higher after-tax outcome due to salary or career growth.
This article discusses tax policy and immigration implications; consult a qualified tax professional for personalized guidance.
Tax rates and policies change; verify current figures with authoritative sources.
This article explores why California and New York residents pay more in taxes compared to those in Texas or Florida. It highlights the role of state income taxes, local NYC taxes, and the impact of the federal SALT deduction cap. The piece explains that these differences are legal results of federalism rather than discrimination, and encourages taxpayers to weigh higher taxes against career opportunities in high-paying sectors.
