Deciding where to live can be a difficult choice, with many factors to consider like housing costs, taxes, healthcare, transportation, and more. Two states that often get compared are California and Texas, which have very different costs of living. Californians pay some of the highest costs in the country, while Texas is known for having a lower than average cost of living.
Cost of Housing
One of the biggest factors in cost of living differences between California and Texas is housing costs. California home prices are among the highest in the nation, especially in desirable coastal cities like San Francisco and Los Angeles. The median home price in California is over $800,000, more than double the national median. Rent is also very high, with average apartment rents over $2,000 per month in many California cities.
In comparison, Texas home prices and rents are far more affordable. The median home price in Texas is around $325,000, less than half of California’s. Average apartment rent is below $1,500 per month in most Texas cities. Buying a home or renting an apartment is much cheaper in the Lone Star State.
Median Home Prices
| State | Median Home Price |
|---|---|
| California | $834,400 |
| Texas | $325,000 |
Average Apartment Rent
| State | Average Rent for 2 Bedroom Apartment |
|---|---|
| California | $2,150 |
| Texas | $1,180 |
The huge gap in housing costs is one of the main reasons Texas has a lower cost of living than California. Whether buying or renting, housing eats up a larger chunk of the budget in The Golden State.
Taxes
Taxes also contribute to the cost differential between the states. California has some of the highest state income tax rates in the U.S., with a top rate over 13% for high earners. Sales taxes can reach over 9% in some cities. Property taxes are capped by Proposition 13, but still represent a significant expense for homeowners.
Texas residents pay no state income tax and face lower property taxes overall. The sales tax rate is similar to California when you combine the state and local rates. But avoiding state income tax gives Texas residents a big tax advantage and more take-home pay.
State Income Tax Rates
| State | Top Individual Income Tax Rate |
|---|---|
| California | 13.3% |
| Texas | 0% |
Average Effective Property Tax Rates
| State | Average Effective Property Tax Rate |
|---|---|
| California | 0.72% |
| Texas | 1.69% |
While property taxes are higher in Texas, avoiding state income tax helps offset that cost for many residents.
Cost of Living Index
Cost of living indexes compare the price of consumer goods and services in different areas, including housing, food, transportation, utilities, healthcare and taxes. They can measure overall cost of living differences between states.
According to the ACCRA Cost of Living Index, Texas has an overall composite index of 95.2 compared to California’s score of 140.9. This means California’s cost of living is about 48% higher than Texas when accounting for the variety of expenses.
Specific Texas cities have even lower scores, like Austin at 94.4 and Houston at 91.3. California cities range from San Francisco at 185.3 to San Diego at 144.5. No matter which cities you look at, Texas consistently rates as more affordable than California metro areas.
ACCRA Cost of Living Index
| State | Overall Composite Index |
|---|---|
| California | 140.9 |
| Texas | 95.2 |
The cost of living index demonstrates how expenses across the board are lower in Texas compared to California, especially housing.
Healthcare Costs
With ongoing inflation in healthcare costs, medical expenses take up a growing share of household budgets. Healthcare pricing also impacts health insurance premiums. Both private health insurance rates and Medicaid costs per enrollee are lower in Texas than California.
Employer-sponsored health plans cost over $8,000 annually for individual coverage in California versus around $7,000 in Texas. And Texas has not expanded Medicaid under the Affordable Care Act, which constrains per capita spending growth in the program. Lower healthcare costs translate to savings for Texas residents compared to Californians.
Average Annual Health Insurance Premiums
| State | Average Annual Premium – Individual Coverage |
|---|---|
| California | $8,130 |
| Texas | $7,050 |
Medicaid per Enrollee Spending
| State | Medicaid per Enrollee Spending |
|---|---|
| California | $9,928 |
| Texas | $8,529 |
With lower healthcare costs, Texas residents spend less of their budgets on medical care and health insurance.
Transportation Costs
The cost of transportation, including gas prices and commuting costs, can significantly impact budgets. Texas has lower gas prices than California, saving drivers when filling up their tanks. Texas also has lower public transit costs and more affordable car insurance premiums.
Texas gas prices currently average around $2.50 per gallon, while California drivers pay over $4.50. With longer commutes and more driving in Texas, the lower fuel costs provide real savings. Car insurance rates are also about 15% cheaper in Texas on average.
For residents commuting via public transportation, monthly passes can cost $100+ in California cities compared to just $60-$75 in major Texas metro areas. Transportation costs all add up to be lower in Texas than California.
Average Gas Prices
| State | Average Gas Price per Gallon |
|---|---|
| California | $4.54 |
| Texas | $2.52 |
Average Monthly Car Insurance Premiums
| State | Average Car Insurance Premium |
|---|---|
| California | $166 |
| Texas | $143 |
With lower gas prices and insurance rates, driving is more affordable in Texas. Public transit is also cheaper for commuters.
Grocery Costs
Grocery costs make up a significant portion of any household budget. Texas has slightly lower grocery costs compared to California. Based on the ACCRA index, groceries are about 5% less expensive in Texas.
Some specific grocery items have a larger price gap. Milk prices are almost 20% cheaper in Texas. Eggs cost nearly 40% less in Texas than California. While produce and meat can vary seasonally, Texans generally pay a bit less at the supermarket checkout than Californians.
ACCRA Grocery Cost of Living Index
| State | Grocery Index |
|---|---|
| California | 117.2 |
| Texas | 111.0 |
Saving on groceries provides an extra cost advantage for Texas residents.
Utilities Costs
Utility costs like electricity, natural gas, water, and garbage pickup make up a significant portion of monthly home budgets. Texas has lower average prices for utilities compared to California.
Electricity rates in Texas average around 10 cents per kWh, while Californians pay over 20 cents per kWh. With hot summers requiring air conditioning, lower electricity costs are a boon. Natural gas also costs about 20% less in Texas. Water and garbage bills run cheaper as well.
Saving on utilities can really add up, especially for larger households. Texas utility costs help contribute to an overall lower cost of living for residents.
Average Electricity Rates
| State | Average Electricity Rate (cents/kWh) |
|---|---|
| California | 22.7 |
| Texas | 10.7 |
Average Monthly Natural Gas Costs
| State | Average Monthly Natural Gas Bill |
|---|---|
| California | $60 |
| Texas | $49 |
Lower utility bills let Texans stretch their dollars further.
Conclusion
After looking at the various cost of living factors, Texas clearly comes out as the more affordable state overall. Housing, taxes, healthcare, transportation, groceries, and utilities all cost less in Texas compared to California.
Texas residents get to keep more of their hard-earned money thanks to no income tax and lower housing costs. Families find their budgets go further in Texas, with cheaper groceries, gas and utilities. Lone Star State living provides savings across the board that add up substantially over years.
While California offers world-class cities, scenic landscapes, and mild weather, the steep cost of living hurts long-term finances for many residents. Texas delivers a high quality of life at a budget-friendly price that draws transplants from around the country. For most Americans seeking to maximize savings, Texas provides a lower cost way of life thanks to affordability across the board.