Research Areas
California
The Facts on California's Tax Climate
Here are some basic facts on California's tax system and how it compares to other states:
Tax Freedom Day Arrives on April 20 in California Tax Freedom Day is the day when Americans finally have earned enough money to pay off their total tax bill for the year. In 2009, California taxpayers had to work until April 20 to pay their total tax bill (ranked 4th highest nationally), 7 days later than national Tax Freedom Day (April 13). The Tax Freedom Days of neighboring states were: Oregon, April 9 (ranked 26th nationally); Nevada, April 8 (ranked 29th nationally); and Arizona, April 10 (ranked 23rd nationally).
Full study of Tax Freedom Day, nationwide and in each state
California's State/Local Tax Burden Above National Average
Estimated at 10.5% of income, California's state/local tax burden percentage stands at 6th highest nationally, above the national average of 9.7%. Californians pay $5,028 per capita in state and local taxes.
California's State and Local Tax Burden, 1977-present
Other States' State/Local Tax Burdens
Historical Chart Comparing All States' State/Local Tax Burdens from 1977 to 2008
California's 2009 Business Tax Climate Ranks 48th
California ranks 48th in the Tax Foundation's State Business Tax Climate Index. The Index compares the states in five areas of taxation that impact business: corporate taxes; individual income taxes; sales taxes; unemployment insurance taxes; and taxes on property, including residential and commercial property. The ranks of neighboring states are as follows: Washington (12th), Oregon (9th), Arizona (22nd), Nevada (3rd) and Hawaii (24th).
50-State Comparison of Business Tax Climates (data only)
2009 State Business Tax Climate Index, Sixth Edition (full study)
California's Top Individual Income Tax Rate Is the Highest in the Nation
With seven brackets and a top rate of 10.3 percent for those earning over $1,000,000. California's individual income tax has the second-highest rate and one of the most highly progressive structures in the nation. In 2006, California's individual income tax collections were $1,418 per person, which ranked 6th highest nationally. Since most small businesses are S Corporations, partnerships, or sole proprietorships, they pay their business taxes at the rates for individuals. That makes California's taxes on small businesses some of the most burdensome in the nation.
50-State Table of Individual Income Tax Rates
50-State Table of State Individual Income Tax Collections
50-State Table of State and Local Individual Income Tax Collections Per Capita
California's Corporate Income Tax Rate is the Highest in the West
Corporations looking to relocate, or even establish, a business in the West may shy away from California, as the state's 8.84% flat rate is the highest corporate tax rate in the West. Nationally, only eight states have a higher top corporate tax rate than California. In 2007, state-level corporate tax collections (excluding local taxes) in California were $307 per capita, which ranked 6th highest nationally.
50-State Table of Corporate Income Tax Rates
50-State Table of State and Local Corporate Income Tax Collections Per Capita and Per Household
50-State Table of State Corporate Income Tax Collections Per Capita
California's Sales Tax Rate Exceeds National Median
California levies a 7.25% general sales or use tax on consumers, which is above than the national median of 5.5%and local governments are permitted to levy another 1.5%. State and local governments combined collected $1,117 per capita in general sales taxes in 2006, which ranks 13th highest nationally. California's statewide gasoline tax stands at 35.3 cents per gallon and is the 3rd highest in the nation, while its cigarette tax stands at $0.87 per pack of twenty (29th highest nationally). Additionally, California's general sales tax and various municipal sales taxes are levied on the sale of gasoline. The sales tax was adopted in 1933, the gasoline tax in 1923 and the cigarette tax in 1959.
50-State Table of Sales and Excise Tax Rates
50-State Table of State and Local General Sales Tax Collections Per Capita and Per Household
50-State Table of State and Local General Sales and Gross Receipts Tax Collections Per Household and Per Capita
Property Tax Collections Slightly Below Average
Despite Proposition 13, California ranks in the middle of the pack when the states are ranked on combined state/local property tax collections. Proposition 13 favors people who have owned the same property many years by only permitting re-evaluations at resale. As in most states, local governments in California collect far more in property taxes than the state does. California's localities collected $968.01 per capita in property taxes in fiscal year 2006, the latest year for which the Census Bureau has published state-by-state data. At the state level, California collected $62.59 per capita during FY 2006. That brought its combined state/local property taxes to $1,030.60 per capita, ranked 28th highest nationally.
State property tax collections per capita by state
Federal Tax Burdens and Expenditures: California is a Donor State
California taxpayers receive less federal funding per dollar of federal taxes paid than the average state. In 2005, California taxpayers received only 78 cents in federal expenditures for every dollar in federal taxes. In 1995, by contrast, California taxpayers were receiving 94 cents in federal expenditures for each tax dollar.
Comparing the amount of federal taxes sent to Washington with the amount of federal spending coming back to the state
