Not only that, CA has Prop 13: for better or worse, your property tax is essentially frozen in the year you buy your home in CA. In TX it increases with the market value every year. And the assessors are ruthless – market value of your home went up by 20%, as they have the past few years? Expect your tax bill to too (granted, I believe legislators have restricted this to a maximum increase of 8% a year as of this session, but I believe localities are still allowed to exceed that in some cases).
Source: I'm from Dallas, and a homeowner in Los Angeles. Though rates are publically available:
https://smartasset.com/taxes/california-property-tax-calcula...
There is very good evidence that property taxes are capitalized into property values. Land taxes in specific are fully capitalized (which is to say, they lower the price of the land, and the landlord can't pass on the tax to tenants), right in line with long-standing theory:
https://web.archive.org/web/20201108135554/https://dors.dk/f...
Paying property tax might sting, but those ruthless assessors and high rates are one of the few things keeping housing affordable in Texas.
Unaffordable housing prices are as much a policy choice as a function of the market.
And TX has a sales tax of 6.25%, while SF is 9.25%.
And no state income tax in TX.
It’s not even close.
Cities have their own sales tax. And so can school districts (and they can have their own property taxes, too).
And sure, you're right, there's not much housing under $1M in the Bay Area. That doesn't change the fact that a $1M home in TX still pays about the same in property taxes as a $2M home in SF. Or the fact that in SF your property taxes are essentially frozen at purchase price, and in TX they will increase every year.
Austin/Dallas/Houston/San Antonio are not classified as "High Cost of Living" areas, as SF/LA/NYC are. This means that a conventional mortgage as of 2021 in Texas is capped at $548k, while in LA/SF it's $822k. The practical effect of that is any mortgage higher than $548k in TX is classified as a "Jumbo"/non-conventional loan, which usually comes with a higher interest rate and/or higher percent down required.
You want a $1M house in TX rather than CA? Be prepared to put $400k+ down or accept a higher rate + PMI, rather than the normal 20% down in CA. All on top of the fact that you're paying the equivalent in taxes to a $2M+ home in CA.
When I bought my home this year, it got re-assessed at my purchase price, yes. But for as long as Prop 13 is the law of the land, no matter how much home prices in CA inflate, my property tax is more or less capped at the price I paid for the house.
In November 2020, California scaled back on some of the benefits of Prop 13 for families. Prior to Prop 19, properties could pass from parents to children and the property tax basis would not increase. Now, the benefit is limited to the parents' primary residence, the inheriting child or children need to reside in the property for one year as their primary residence, and the amount excluded from reassessment is limited to $1m.
The main proponents of Prop 19 were realtors who expected the change to result in more sales of properties after parents die. I haven't seen data on it, but they were probably right. There will probably be more sales as children who inherit their parents' properties can't afford to keep them after reassessment.
Prop 19 was titled the "The Home Protection for Seniors, Severely Disabled, Families, and Victims of Wildfire or Natural Disasters Act" because it allowed seniors and victims of wildfires to sell a home and buy a new one anywhere in the state and carry over their current property tax assessment, regardless of the sale price. However, it totally undermined one of the best ways for families to pass wealth on to their children, the acquisition of properties for investment. Corporations, of course, were unaffected.
The largest share of property taxes is actually school districts which run roughly 50% of the property tax in austin. The city is 25% and the other 25% is the county, health district, and community college.
Tax rates float. If the valuations double, but the taxing entity budgets stay the same, then the tax rate will drop in half.
Rising valuations dont have much to do with the increase in taxes over time.
Financially speaking, either place may turn out advantageous depending on your house's price and income. CA (Bay Area) has a lot of other positives that are almost impossible to get in TX - tech scene (quality and quantity), nearby sea, desert AND mountains, good weather are just some of them.
Many years ago, I chose to move to TX as opposed to CA. But most recently, after living abroad for some years, I picked Bay Area to move back to mainly because most of my friends have converged to Bay Area over the years - almost all are in tech. However, if you aren't involved in tech and don't care about some of the other positives of the Bay Area, Austin is almost a no-brainer.
I live in Dallas. We're growing massively, but honestly, I haven't really noticed too many changes in my day to day. It takes just as long to get somewhere as it did 5 years ago.
Because they were large, spread out cities already, the highway infrastructure, suburban development, and local planning have all been optimized to support that reality. Austin tried to keep that smaller college-town feel, which was hip and trendy and cool for visitors like SXSW, but is now leading to the awful growing pains they face today.
I think Austin has the potential to be a really great city, but it's gonna take decades to get anywhere near that reality.
In the meantime, Houston is building another loop, Dallas is extending the DNT practically to Oklahoma, and Ft Worth has a shiny new tollroad on the west side of the city. They'll keep absorbing growth while Austin struggles to get organized. Unfortunately, many of the people flocking to Texas don't know any better so they go to Austin first.
My 2¢.
I do wonder how much this affects salaries, though. Do employers in states with lower or no income taxes tend to pay worse for the same job than employers in states with higher income taxes?
One thing to consider though, is that the companies available to work for outside Austin, probably aren't supplementing salaries with generous stock compensation packages. If more startups move to Texas, that could change too.
With two working adults in the house, 120k/ea is a very comfortable living.
A lower income tax may cause more people to live somewhere and/or more people to be willing to work for less, but it still comes down to whether or not the supply of labor willing to work at a lower price exists.
Arguably taxes are higher for newcomers. Yes rates are lower but purchase price is insane. But Native Sons of the Golden West pay pennies on the dollar in property tax. Old businesses to. It's a $30B per year tax cut to successful real estate investors. That's 3x the size of the NSF and several billion more than NASA.
This is the root of all California's problems. Underfunded schools, endless sprawl, state parks closing, crumbling infrastructure and rampant housing speculation. It's all because of Prop 13.
No, the root of all California’s problems are Californians. …/s?
Compare Austin to somewhere near Freemont or compare TX to CA. Comparing Austin to all of CA is more than a little dishonest since there's a lot of rural nowheres in CA to drag down the average price but the comparison exludes all of Texas's rural nowheres.
