William Byrnes' Tax, Wealth, and Risk Intelligence

I am contrasting state and locality living for 2025 updates. I am sharing what I found for Texas, California, and New York state and local budget expenditures, followed by accumulated state and locality debts for FY2024. Then, I contrast the total income tax and the property tax for living in Dallas, Fairmont-Los Angeles, and Nassau County. There is no particular reason for these three locals; with the footnote links, you can do your own calculations.

Texas’ state budget for FY2024 is approximately $160 billion (it is enacted biennially, the total spending amount for 2024 and 2025 being  $321.3 billion). Texas had a rolling forward $32.7 billion surplus from its previous biennial budget and an additional $23.5 billion in its rainy day (Economic Stabilization) fund. Public schools and higher education comprised 50 percent of the budget. Health and human services comprised 30 percent. For the upcoming biennium budget, Texas estimates revenue from state funds to reach $342.3 billion that may, under its balanced budget requirement, be appropriated. The Economic Stabilization Fund (ESF) is projected to grow to $27.1 billion through FY2025.

Contrast California’s state budget which for FY2024 was $327 billion with an anticipated deficit of $14 billion, with a projected FY25 deficit of between $58 billion and $73 billion.[1] California, like Texas, maintains a similarly sized rainy day fund (Budget Stabilization Account) of approximately $22 billion, and $900 million of additional safety net reserves. California’s FY2025 budget proposes total state expenditures (excluding federal funds) of $291.5 billion. This FY2025 budget proposal projects a reduction in reserve balances to $11.1 billion for the rainy day fund but with an additional $3.9 billion held for the Public School System Stabilization Account (PSSSA).[2] Considering the forecast FY2025 deficit, the Governor and Legislature have been working toward some FY2025 spending reductions and spending delays.[3]

Texas’ potential budget spending approximately doubles when factoring in local general revenues, to $310.1 billion for FY2021 for example. California’s combined state and local direct general expenditures were $574.8 billion in FY2021.[4]

Consider one other state. New York state’s All Funds budget which includes federal government funds for FY2024 is $236.8 billion of which $140.2 billion emanates from state revenues.[5] The budget is balanced with a negligible gap between revenue and expenditure. New York’s combined state and local direct general expenditures were $315.7 billion in FY 2021.[6]

The Texas state debt is $70.94 billion.[7] Texas’ nonstate local debt (e.g. county, school board, localities, water utilities, community colleges, hospitals) debt stood at $308 billion. California’s state debt of $70.9 billion is nearly the same as Texas. But if Lease-Revenue bond debt is included, it totals $78.7 billion with an additional $30 billion debt authorized but not yet sold. Including county and local debt of approximately $325 billion,[8] as well as the unfunded pension obligations that come due as employees retire, the total California state government debt reached approximately $1.6 trillion in 2022.[9] The New York state-related debt which includes debt issued by the state, by public authorities on behalf of the state and other debt obligations for which the State is responsible is projected to grow from $58.5 billion in FY 2023 to $66.7 billion by the end of FY 2024.[10]  In addition, New York City has issued over $90 billion of outstanding debt as of FY2023.[11] The cumulative debt of New York’s 1,178 state and local public authorities is $329 billion as of 2023.[12]

For a married couple earning $200,000 annually, the annual state and local income tax burden for Texas would be nil because Texas does not impose an income tax, for California $12,222, and for New York $9,897.[13] Property tax for a home assessed at $600,000 in Dallas is $10,860, in Fairmont-Los Angeles is approximately $5,000, and in Nassau County $6,300.[14] Income and property tax together for the three states of Texas, California, and New York is comparatively $10,860, $17,222, and $16,197, respectively. Federal income tax is estimated at $41,353.[15] Thus, total tax for the couple earning $200,000 and living in a $600,000 home in the three states of Texas, California, and New York is $52,213, $58,575, and $57,550.

I can add a couple more comparisons that impact the tax calculations. Calculating the average sales tax paid for the hypothetical couple in each state is relatively easy. Dallas’ sales tax rate is 8.25%, Los Angeles’ is 9.5%, and New York City’s is 8.875%. Very roughly, for the couple’s $50,000 annual sales taxable expenditure (restaurant tax considerations are left out), New York will be about $300 more sales tax a year considering a 20% higher cost for expenditure over Dallas, and roughly $687.50 more in Los Angeles using a 10% price difference.

A harder one to determine and then calculate but still impactful is the average annual transportation cost for the three states’ municipalities selected. For example, the average gasoline tax paid annually by a family. Yet the gasoline tax is a bit tricky because California is about to initiate a mileage tax to begin replacing its gas tax because, with hybrids and electric vehicles, petrol tax revenue has plummeted well over $1 billion annually, causing a deeper hole in the state road budget. Also, comparing a gas or mileage tax in Texas and California is relatively straightforward where, in general, cars are an aspect of life. But for New York, the tax comparison may instead need to factor in the average annual spend on public transport such as daily trains, busses, and the subway.

Then there is the matter of tolls. These can be estimated for Dallas and for Los Angeles. New York is a bit trickier. Residents outside Manhattan who drive (for example, New Jersey) pay the bridge (e.g. $15.38 for the GW with EzPass during the day) or tunnel toll and, beginning in June, the new $15 a day New York congestion tax.[16] Take an example of our couple, one partner must go to the Manhattan office, say, four days a week (note: banks are recalling their employees to the office, and FINRA/securities dealer rules do not allow work from home without the same periodic compliance inspections required at the bank, administratively challenging to say the least). That’s today $60 a week (i.e. about $280 a month) versus the doubling of it from June 1, $560 a month. That extra congestion toll, rounding it to $3,300 annually, must be enough to change behavior (because, with the regular toll, it is $6,600 annually, post-tax, i.e. about $10,000 earnings spent on tolls). Thus, the hypothetical person will switch to the bus or train into the city, then the subway or transfer bus. In conclusion, regarding a comparison between a Texas gasoline tax versus a California mileage tax and the New York public transportation cost, my guess is that Texas is less cost for the couple but perhaps at the expense of environmental impact. That’s a cost-discussion for another day.

Let me know about your state and locality burdens in the comments. And thank you for your readership of my weekly Tax Facts articles. Prof. William Byrnes

[1] 2024-25 Budget California’s Fiscal Outlook, Legislative Analyst’s Office, December 7, 2023. https://lao.ca.gov/Publications/Report/4819; 2024-25 Budget Deficit Update Legislative Analyst’s Office, February 20, 2024. https://lao.ca.gov/Publications/Report/4850.

[2] Proposed Budget – Fiscal Year 2025, National Assn of State Budget Officers. https://www.nasbo.org/mainsite/resources/proposed-enacted-budgets/california-budget.

[3] 2024-25 Budget Deficit Update, Legislative Analyst’s Office, February 20, 2024. https://lao.ca.gov/Publications/Report/4850.

[4] State Fiscal Briefs, California, April 2024. https://www.urban.org/policy-centers/cross-center-initiatives/state-and-local-finance-initiative/projects/state-fiscal-briefs/california.  Texas, April 2024. https://www.urban.org/policy-centers/cross-center-initiatives/state-and-local-finance-initiative/projects/state-fiscal-briefs/texas.

[5] Summary of Recommended Changes to the Executive Budget  State Fiscal Year 2024-25, NY State Assembly Ways & Means Comm., May 2024. https://nyassembly.gov/Reports/WAM/2024summary_changes/.

[6] State Fiscal Briefs, New York, April 2024. https://www.urban.org/policy-centers/cross-center-initiatives/state-and-local-finance-initiative/projects/state-fiscal-briefs/new-york

[7] Texas Bond Review Board, August 31, 2023. https://www.brb.texas.gov/state-of-texas-debt/.

[8] Annual Debt Transparency Report (ADTR) – Principal Outstanding by Issuer Group, FY2023 data, Ca. State Treasurer. https://debtwatch.treasurer.ca.gov/reports/adtr-outstanding-principal.

[9] California State and Local Liabilities Total $1.6 Trillion. California Policy Center, February 28, 2022. https://californiapolicycenter.org/california-state-and-local-liabilities-total-1-6-trillion/.

[10] Debt Service, Division of the Budget, NY State. https://www.budget.ny.gov/pubs/archive/fy24/ex/agencies/appropdata/DebtService.html. See also, FY 2024 Bond Caps and Debt Outstanding. https://www.budget.ny.gov/investor/bond/BondCapChart.html.

[11] Annual Report on Capital Debt and Obligations Fiscal Year 2024, NY City Comptroller. https://comptroller.nyc.gov/reports/annual-report-on-capital-debt-and-obligations/.

[12] Public Authorities by the Numbers 2022, Reinvent Albany, Jan. 13, 2023. https://reinventalbany.org/2023/01/public-authorities-by-the-numbers-2022/.

[13] Income tax estimation collected using Talent.com’s calculator. https://www.talent.com/tax-calculator.

[14] State property tax was estimated using SmartAsset for Dallas, Los Angeles, and Munsey. https://smartasset.com/taxes/california-property-tax-calculator.

[15] Married couple earning $200,000 without pretax contributions for medical or retirement. https://smartasset.com/taxes/income-taxes.

[16] MTA projects Central Business District Tolling Program. https://new.mta.info/project/CBDTP#:~:text=Starting%20on%20June%2030%2C%202024,district%20in%20the%20United%20States.