At least part of it is Texas' business-friendly and employee-friendly tax climate.
Employee-friendliness overall varies. I'd say the employment laws are generally worse for employee freedom than California's, mainly because TX courts are more willing to enforce noncompete clauses (though they aren't as willing to as some states).
The numbers I found show total state & local tax collected per capita for Texas is $3,580 vs. $5,028 for California. That's a 40% increase over Texas. Nothing to sneeze at.
Texas: http://www.taxfoundation.org/taxdata/show/482.html
Cali: http://www.taxfoundation.org/taxdata/show/443.html
Even your numbers show a 20% penalty for living in Cali.
But either way it's not all that much of a difference in absolute terms, even if it is in percentage terms. I mean, $1500 on average. Even if you make a lot over the average, it still seems like Texas's biggest win will be the $300,000 difference in the price of a house, or $1000/mo difference in rent, not a few $k savings in taxes.
Building a new house in Texas is easy and cheap; in California it is nearly impossible, and very expensive.
Houses seem to be 1/2 to 1/4 the California price in similarly nice (but not as wealthy on an absolute scale) neighborhoods. When I stroll the aisles of a grocery store in the Austin area, many staples are 1/2 the cost of bay area supermarkets.
Edit: upped low-end of house ratio to more realistic 1/4 from 1/6
It might have made a bigger difference if more of the rest of my spending was on stuff that actually varied in price geographically. But computer stuff and books cost the same everywhere; sadly TX's better purchasing power per dollar doesn't actually get you a $1000 laptop for $800, or a $50 book for $40!
(As an equally plausible hypothesis I'd guess that outside of extreme regions like Antarctica, higher wages are a prime reason for real estate values, and thus contribute to higher costs of living.)
Labor costs and the cost of living both affect the other. Arguing which came first is pointless since neither exists in a vacuum.
Furthermore even people in marginal jobs will make more if they live in a high cost area. For instance a gardener can charge more per hour in Los Angeles than in Ohio, even though the productivity of the two are identical.
Wages are fundamentally set by supply and demand. Productivity affects demand, and hence affects wages. But a high cost of living changes the supply curve, and also affects wages.
> For instance a gardener can charge more per hour in Los Angeles than in Ohio, even though the productivity of the two are identical.
Yes, that's because gardening isn't traded.
BTW, to be having this conversation makes me feel like I'm trapped in Chapter 33 of 'A Connecticut Yankee in King Arthur's Court' (Mark Twain, 1889):
http://www.archive.org/stream/connecticutyanke00twai#page/32...
Though, Twain first lays it out on p. 304 of the same edition:
http://www.archive.org/stream/connecticutyanke00twai#page/30...
A man who hasn't had much experience, and doesn't think, is apt to measure a nation's prosperity or lack of prosperity by the mere size of the prevailing wages; if the wages be high, the nation is prosperous; if low, it isn't. Which is an error. It isn't what sum you get, it's how much you can buy with it, that's the important thing; and it's that that tells whether your wages are high in fact or only high in name.