Study says living in California imposes a $26,478.72 ‘cost-of-living penalty” on typical middle-class family

Everyone knows living in California is more expensive than in other states – but a new report out makes a staggering total calculation of all the added costs and blames state politicians for imposing “unreasonable and completely unnecessary cost-of-living-penalty.”

“This report should be a wake-up call to all Californians that they are being unfairly punished by the bad policies imposed on them by their politicians – and they are literally paying the price for it,” said Carl DeMaio, Chairman of the Transparency Foundation – the non-profit, non-partisan group that published the study.

The Transparency Foundation’s Cost of California Report compares costs in every major household budget category between California and national averages – including for housing, utilities, food, gas, transportation, healthcare, insurance, childcare, and taxes.

“In every household budget category, the cost of living in California is exponentially higher than the national average – and costly mandates and bad policies are to blame,” said DeMaio.

Outside of the analysis of each category of living costs is a calculation made by the foundation to illustrate the effects of California’s high cost of living on a typical middle-class family.

The study shows that a typical middle-class family of three earning $130,000 a year faces a shocking “Cost of California” penalty of $26,478.72 versus if they simply paid the national average of cost in each category.

What’s worse, the typical middle-class family examined by the report ends up running an annual deficit of $23,710.20 versus being able to run an annual surplus of $2,768.52 if their costs were simply benchmarked to the national average in each category.

Middle Class Household Income: $130,000.
Average Income Taxes: $42,813.
Middle Class Family Total Net Income: $87,187/year or $7,265.58/month.
Total monthly cost of living in California: $9,241.43.
Total monthly cost of living if paying national averages: $7,034.87.
Annual expected shortfall for Middle Class Family from living in California: -$23,710.20.
Annual expected surplus for Middle Class Family if paying national averages: $2,768.52.
Net “Cost of California” in 2022: $26,478.72.

The Cost of California report documented the following cost penalty in each category:
Housing Costs: 32 percent for homeowners; 47 percent for renters
Gas Costs: $2.10 per gallon higher, 25 percent more on average.
Food Costs: 4 percent higher for grocery bill.
Water Costs: 47 percent higher.
Healthcare Costs: 42 percent higher for health care services.
State and Local Taxes: 14 percent higher.
Childcare: 34 percent higher.
Electricity Costs: 48 percent higher.
Car Insurance: 22 percent higher.

In only two categories did living in California show any cost savings. Health insurance (which is subsidized by the state government) is a mere 3 percent less than the national average, while shockingly homeowner’s insurance was 68 percent lower than the national average.

But that is likely going to change with state politicians signing off on a new risk and rate model for home insurance that will lead to cost spikes.

The Transparency Foundation’s report reinforces what public polls are showing. The Los Angeles Times and Strategies 360 conducted a poll in the Spring of 2023 that showed 40 percent of Californians are seriously looking to move out of the state soon.  Of those who were considering moving, 61 percent said it was due to how expensive it is to live in California, while 27 percent said they were considering moving due to the state’s politics.

In a Public Policy Institute of California poll conducted just this year, 57 percent of all adult respondents said that they are experiencing financial hardship due to rising prices. Worse still, 76 percent of those making less than $40,000 per year said they were experiencing financial hardship. Even among those making between $40,0000 and $79,999 per year, 66 percent said they were suffering.

DeMaio said incumbent state and local politicians should be ashamed of the financial hardships they have created for working families in California – and should be held accountable.

“California politicians have taken the typical middle-class family from financial security to deep indebtedness – and for what?” DeMaio asks. “California politicians will argue their costly mandates and regulations have some sort of benefit, but they are never held accountable for quantifying those so-called benefits,” DeMaio notes.

With the Transparency Foundation’s report, however, the cost of the mandates and regulations can now be quantified in terms of direct financial costs that are being borne by all Californians. By calculating and making these costs more transparent, DeMaio hopes that Californians demand a true cost-benefit analysis on every California law, regulation and mandate that is imposed by the state that are not seen in other US states.

The Transparency Foundation’s report makes specific recommendations in each cost-of-living category on how California’s leaders can reduce costs.

Specifically, the report recommends that policymakers adopt the same regulations as the lowest cost state in each cost category.  To help in that process, the report recommends the creation of a state “Cost-of-Living Benchmark” Commission to identify ways to harmonize California regulations and policies to national ones in each cost category and propose the entire package of reforms for adoption or rejection by voters at the next state election.

The Transparency Foundation has announced it will update its Cost of California report annually – and will expand its research and advocacy programs to fight for common-sense reforms to reduce costs for Californians.

About The Transparency Foundation
The Transparency Foundation is a 501c3 nonprofit, nonpartisan organization committed to making public institutions more transparent and accountable to the people they serve. 

The Foundation sponsors investigatory research projects on a range of issues related to public finance and government performance, including how government manages its finances, whether government funds are being used for intended and legitimate purposes, what tangible outcomes are produced from government programs, what is the true cost of a program, how does a program compare to benchmarks, and how government can improve its overall transparency, accountability and performance.