New Analysis of California’s Individual Income Tax Rates
July 15, 2008
California has the dubious distinction of being the only state with a double-digit individual income tax rate. A new Tax Foundation Fiscal Fact examines the state’s changing tax rates over the years in light of the current debate in the legislature on whether to increase the top rate again. From Fiscal Fact No. 134, “California Legislators Push for More Double-Digit Income Tax Rates,” by William Ahern:
The next major change occurred in 2004 when a ballot initiative added a new top bracket, 10.3 percent of income above $1,000,000. Perhaps because it was not enacted by the legislature in a normal tax-writing procedure, or perhaps because the revenue is transferred to a mental health services fund instead of the general fund, the Franchise Tax Board doesn’t incorporate the new bracket into the existing rate structure on any of its forms. Instead, they still refer to 9.3% as the top rate, and the extra 1 percent over $1 million is extracted on a separate line of the tax form. But the effect is identical, and most publishers of tax information either incorporate it into tables as we have done below in Table 3, or remark on the extra 1% in a footnote.