Texas vs California: Business Tax Comparison 2025

The Great Migration

Thousands of businesses have relocated from California to Texas in recent years. Tax savings are a major factor, but the full picture is more nuanced than headlines suggest.

California Tax Burden

California has the highest state income tax in the nation at 13.3% for top earners. Corporate tax is 8.84%, and there is an $800 minimum franchise tax. Sales tax starts at 7.25%.

Texas Tax Burden

Texas has no personal income tax and no corporate income tax. However, it does have a franchise (margin) tax of up to 0.75% on gross revenue above $1.23 million. Property taxes are also among the highest in the nation.

The Real Comparison

For a restaurant earning $750K: California effective rate is roughly 8-10% total, while Texas is 3-5%. That difference of $30K-$40K per year adds up fast. See exact numbers in our state comparison tool.