California and Texas, the two most populous states in the US, often draw comparisons due to their contrasting approaches to governance and their significant economic and social differences. This article delves into a comprehensive comparison of California and Texas, focusing on the size of their economies and governments, as well as key policy areas and performance metrics.
The Scope of Government: California vs. Texas
A key difference lies in the size and scope of their state and local governments. In 2019, California’s per-resident state and local government spending was $16,145, a staggering 60% higher than Texas’ $10,024. This disparity reflects California’s higher taxes and more extensive social programs. Even after adjusting for California’s higher GDP per capita, its public sector spending still represents a larger portion of its economy (20.3% of GDP) compared to Texas (15.4%).
Figure 1 illustrates the overall government revenue and spending in the US, highlighting the significant role of state and local governments.
Revenue Sources: Taxes and Beyond
The primary driver of this spending gap is the stark contrast in tax policies. California relies heavily on income taxes, boasting the nation’s highest top marginal individual income tax rate. Texas, conversely, is one of the few states without an individual income tax. This difference is vividly illustrated in Figure 2.
Figure 2 breaks down the revenue sources for both states, showcasing California’s dependence on income tax and Texas’ reliance on property and sales taxes.
While property taxes are higher in Texas, this is due to higher tax rates rather than higher property values. California’s Proposition 13 limits property tax growth, resulting in lower rates despite significantly higher property values. Sales tax revenues are comparable in both states.
Figure 3 depicts the significant difference in housing values between California and Texas, highlighting a contributing factor to the property tax disparity.
Expenditure Breakdown: Where Does the Money Go?
Both states prioritize education, but California’s spending per resident is notably higher. However, the most significant spending difference lies in social services and income maintenance, primarily driven by California’s expansive Medicaid program, Medi-Cal.
Figure 4 provides a detailed breakdown of expenditures, emphasizing the disparity in social services spending fueled by differing approaches to Medicaid.
California’s higher spending extends to public safety, environment, housing, and employee retirement programs. Interestingly, Texas outspends California on highways, while California invests heavily in public transit.
Economic Performance: Growth and Income
Texas has experienced rapid population growth, gaining political and economic influence. California, on the other hand, has seen remarkable growth in per capita income and GDP, largely attributed to its thriving tech sector. Both states have witnessed declines in poverty rates.
Figure 5 illustrates the trends in net immigration to California and Texas, a key factor influencing population growth.
Figure 6 shows the patterns of domestic migration between states, revealing California’s net loss and Texas’ net gain of residents.
Conclusion: Two Different Paths
California’s “big government” model, characterized by higher taxes and robust social programs, contrasts sharply with Texas’ “limited government” approach. This fundamental difference is reflected in their budgetary priorities, economic performance indicators, and social outcomes. While both states have strengths and weaknesses, their divergent paths offer valuable insights into the ongoing debate about the optimal role of government in fostering prosperity and well-being. Ultimately, the “better” approach remains a subject of ongoing discussion and depends on individual priorities and values.
