In this heavyweight bout, we’ll use real numbers to explore the difference in an employee’s take home pay for two of the largest startup tech sectors in America.

First, we’ll identify the different employee payroll taxes, and then we’ll run a scenario to show the difference in employee take home pay using a 60k salary.

Employees are subject to the same federal payroll taxes: Social Security, Medicare and Federal Income Tax. Each state has their own specific payroll taxes and regulations, like State Disability Insurance and State Income Tax in California. If you’re (un)lucky enough, some localities within states even have their own payroll taxes and regulations, like Local Income Tax in San Francisco. Most employee payroll taxes are standard rates, except income tax. Employee federal, state, and local income taxes are based on an employee’s elections on Federal Form W-4, and elections on the state/locality’s specific form if applicable.

In this example, we’ll assume our employee is single, has no children, lives alone, and the 60k salary is the only source of income when calculating income taxes. This translates to Single with 1 allowance on Form W-4, and Single with 1 Regular Allowance on the California Form DE-4.

Now let’s run some numbers!

Using the 60k/year example, the annual breakdown for an employee in Texas is:

Gross Pay60,000
Social Security-3,720
Medicare-870
Federal Income Tax-9,196.25
NET PAY46,213.75

In California, the annual breakdown for the same employee earning 60k/year:

Gross Pay60,000
Social Security-3,720
Medicare-870
Federal Income Tax-9,196.25
CA State Income Tax-2,828.57
San Fran Local Income Tax-900
State Disability Insurance-540
NET PAY41,945.18

It’s easy to see that in pure dollars, working in Texas equates to over $4k in extra pocket cash.

This does not factor in other variables like cost of living, which nerdwallet tells us is 45% lower in Austin when compared to San Francisco. It’s no wonder why 110 new people move to Austin each day searching for tech jobs!

Contributed by:
Mike Bryant
Growth Manager