California vs. Florida: The Impact of Business Tax Disparities

Governor Ron DeSantis stated on April 8, 2026, that people and capital are continuing to move from California to Florida. This migration trend is linked to the contrasting tax environments of the two states, specifically the absence of a state income tax in Florida compared to California’s progressive system.

Comparing State Income Tax Structures

Florida maintains a tax code with no state income tax, a factor that frequently attracts high earners. In contrast, California utilizes a progressive income tax system featuring nine brackets. For the 2025 tax year, California’s rates range from 1% for the lowest bracket to 12.3% for the highest. Single filers earning over $1 million and joint filers earning over $2 million are subject to a Mental Health Services Tax surcharge.

The financial impact of these differing policies is significant for high-income individuals. A resident of California earning $500,000 annually pays more than $46,750 more in state income tax than a resident of Florida with the same income. For those earning $100,000, the difference is approximately $4,750 per year.

Broader Tax Burdens and Regressivity

While Florida is often characterized as a low-tax state due to its lack of income tax, some data suggests the burden is distributed differently across income levels. According to a study by the Institute on Taxation and Economic Policy (ITEP) and the Florida Policy Institute (FPI), Florida’s tax system is more regressive than California’s.

The ITEP study found that the bottom 40 percent of income earners pay a higher tax rate in Florida than in California. For the bottom 20 percent of earners, Florida has the seventh-highest state and local tax rate in the nation. This is attributed to Florida’s heavier reliance on sales and property taxes to generate revenue.

The study further noted that Floridians with income under $19,600 pay a larger share of their income in state and local taxes than the top 1 percent of Californians who earn over $862,100 per year. In Florida, residents with moderate incomes pay 3.5 times the rate paid by the top 1 percent of earners.

Comparative Tax Metrics

Beyond income tax, other tax categories show varying advantages between the two states:

• Sales Tax: Florida’s state sales tax is 6% with an average total of 7.01%, while California’s state rate is 7.25% with an average total of 8.82%.
• Gas Tax: California has the highest gas tax at 68¢ per gallon, compared to Florida’s 27¢ per gallon.
• Property Tax: California has a lower effective property tax rate of 0.73%, while Florida’s is 0.86%. California’s property taxes are capped under Proposition 13.
• Total Tax Burden: Florida’s total tax burden as a percentage of income is 9.1%, ranking as the 46th lowest. California’s is 13.5%, ranking as the 6th highest.

Migration and Economic Impact

The disparity in tax burdens has contributed to a clear migration trend. Between 2020 and 2023, over 400,000 more people left California for other states than arrived, with Florida serving as a top destination.

Governor DeSantis highlighted that while capital is moving to Florida, the state does not benefit from the income taxes those individuals may have paid in California. He noted that these individuals still pay business taxes in California, meaning Florida does not capture that specific revenue stream despite the influx of residents and capital.