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California

Down 1 place from 2026

California ranks 49th overall on the 2027 State Tax Competitiveness Index.

Score 3.90 / 10

About California's Tax Code

California combines high tax rates with an uncompetitive tax structure, yielding one of the worst rankings on the Index. The state has a great deal going for it, with its mild climate, excellent research universities, and the ongoing agglomeration effects of Silicon Valley (which is seeing a resurgence with the rise of generative AI), but a tax code that is uncompetitive and threatens to get worse is increasingly driving jobs to other states.

The state’s top marginal individual income tax rate of 13.3 percent is compounded by a 1.3 percent uncapped payroll tax, bringing the all-in top rate to 14.6 percent. Additionally, nonresidents must file income taxes if they work even a single day in the state, and California is one of only four states to still impose an alternative minimum tax.

California is the only state to deny all net operating loss carryforwards; the state’s NOL provisions have been suspended on multiple occasions, most recently through the end of 2026, and are not currently in effect. It is also the only state to use the outmoded ACRS depreciation system rather than MACRS, and does not allow any accelerated first-year expensing. California has a throwback rule, exposing in-state businesses to additional corporate tax liability for certain out-of-state income that would not be taxed elsewhere. After years of conforming to the 2015 version of the federal tax code, California updated its conformity to the code as it existed on January 1, 2025 (with significant modifications). Even this conformity update was outdated from the start, predating changes adopted as part of 2025’s One Big Beautiful Bill Act (OBBBA). Delayed conformity adds to tax complexity. Favorably, however, the state does not incorporate the tax on net CFC tested income under the OBBBA, which does not belong in state tax codes but has been incorporated by some states.

Property taxes in California are constrained by Proposition 13 and subsequent enactments that cap growth in taxable assessed value. This keeps property taxes lower than they would be otherwise—especially for long-time incumbent owners—but at the cost of significant distortions to property markets.

Component Scores

#49 overall · 3.90 / 10

Each component is scored from 0 to 10, where 10 is best. Select a component for its detail page.

2.557.510CorporateIndividualIncomeSalesPropertyUnemploymentInsurance
California Rank and Score by Component
Component Rank Score
Corporate Taxes #39 4.63 / 10
Individual Income Taxes #49 2.56 / 10
Sales Taxes #47 3.64 / 10
Property Taxes #28 4.99 / 10
Unemployment Insurance Taxes #24 5.14 / 10

Ranking Changes, 2020–2027

#49 in 2027 · down 1 place from 2020

California ranked 48th in 2020 and ranks 49th in 2027, a decline of 1 place. The axis is zoomed to the state's range. Ranks for 2020 through 2026 are backcast under the current methodology.

RankHigher is better ↑46th47th48th49th50th202020212022202320242025202620274848484848484849
Show the Table
California Rank and Score by Year
Year OverallCorporateIndividual IncomeSalesPropertyUnemployment Insurance
2020 48 (4.05) 31 (5.03) 50 (2.46) 44 (3.73) 13 (5.47) 28 (4.94)
2021 48 (4.02) 31 (5.04) 50 (2.36) 44 (3.75) 13 (5.53) 29 (4.96)
2022 48 (3.96) 39 (4.73) 50 (2.38) 46 (3.70) 13 (5.50) 24 (5.21)
2023 48 (3.94) 36 (4.84) 50 (2.37) 47 (3.59) 15 (5.35) 21 (5.19)
2024 48 (3.93) 38 (4.83) 49 (2.46) 47 (3.60) 18 (5.31) 23 (5.11)
2025 48 (3.91) 38 (4.81) 50 (2.42) 47 (3.62) 23 (5.17) 26 (5.10)
2026 48 (3.87) 38 (4.78) 50 (2.33) 47 (3.64) 25 (5.08) 26 (5.13)
2027 49 (3.90) 39 (4.63) 49 (2.56) 47 (3.64) 28 (4.99) 24 (5.14)

California Compared across the States

#49 overall

Each row places the states on a 0 to 10 score scale for one measure. California is the large outlined dot, and the dashed line is the 50-state median, so a dot to its right scores better than the typical state. Hover over or tab to any dot for detail, and select it to open that state's profile.

Overall

#49 3.90

Corporate Taxes

#39 4.63

Individual Income Taxes

#49 2.56

Sales Taxes

#47 3.64

Property Taxes

#28 4.99

Unemployment Insurance Taxes

#24 5.14

  • California
  • Other states, by rank (1st to 50th)
  • 50-state median

California and Its Neighbors

#49 overall

California borders 3 states and ranks 49th overall; every one of them ranks higher.

California Bordering states
  • Arizona #17 Score 5.37 32 places better
  • Nevada #21 Score 5.31 28 places better
  • Oregon #37 Score 4.79 12 places better
  • California #49 Score 3.90 This state

What Each Component Includes

The five components of the Index, what each one covers, and where California lands. Open any component for the full breakdown.

  • Corporate Taxes

    Rank #39

    Includes corporate income taxes and gross receipts taxes. Measures the impact of each state’s principal tax on business activities.

    • Corporate Income Tax Rates
    • Tax Credits and Gross Receipts Deductions
    • Net Operating Losses
    • Treatment of Capital Investment
    • Other Corporate Base Variables
    Full Breakdown for California →
  • Individual Income Taxes

    Rank #49

    Covers the tax individuals pay on income, and with it a significant number of businesses — sole proprietorships, partnerships, and S corporations — that report their income through the individual income tax code.

    • Individual Income Tax Rates
    • Marriage Penalty, Capital Income, Indexation
    • Other Individual Base Variables
    Full Breakdown for California →
  • Sales Taxes

    Rank #47

    Covers the general sales tax levied on the purchase price of goods and services, plus excise taxes on gasoline, diesel, tobacco, vapor products, beer, and spirits, and taxes on digital advertising.

    • Sales and Excise Tax Rates
    • Business-to-Business Exemptions
    • Consumer Goods and Services in the Base
    • Sales Tax Structure
    Full Breakdown for California →
  • Property Taxes

    Rank #28

    Includes taxes on real and personal property, net worth, and the transfer of assets — among them capital stock, estate, inheritance, and real estate transfer taxes.

    • Property and Capital Stock Tax Rates
    • Property Tax Bases
    Full Breakdown for California →
  • Unemployment Insurance Taxes

    Rank #24

    Covers the taxes employers pay into the state unemployment insurance program to finance benefits for workers recently unemployed.

    • UI Tax Rates
    • Experience Formulas and Charging Methods
    • Other UI Base Variables
    Full Breakdown for California →

Tax Data Explorer

Every policy variable behind California's 2027 scores, grouped by the report's tables, as of July 1, 2026. Its bordering states are shown alongside to start. Search the variables and values, or add up to 4 states to compare side by side.

157 data points · Shaded values differ from California

Corporate Taxes: Corporate Income Tax Rates

VariableCaliforniaArizonaNevadaOregon
Bracket 18.84% > $04.9% > $0 (differs)None (differs)6.6% > $0 (differs)
Bracket 2n.a.n.a.n.a.7.6% > $1,000,000 (differs)
Gross Receipts TaxNoNoYes (differs)Yes (differs)
Gross Receipts Tax Minimum Raten.a.n.a.0.051% (differs)0.57% (differs)
Gross Receipts Tax Maximum Raten.a.n.a.0.331% (differs)0.57% (differs)
Gross Receipts Tax Rate Used in the Indexn.a.n.a.0.111% (differs)0.57% (differs)

Corporate Taxes: Tax Credits and Gross Receipts Deductions

VariableCaliforniaArizonaNevadaOregon
Job CreditsYesYesNo (differs)No (differs)
Research and Development CreditsYesYesNo (differs)Yes
Investment CreditsNoYes (differs)NoYes (differs)
Compensation Expenses Deductiblen.a.n.a.No (differs)No (differs)
Cost of Goods Sold Deductiblen.a.n.a.No (differs)No (differs)

Corporate Taxes: Net Operating Losses

VariableCaliforniaArizonaNevadaOregon
Conforms to Federal NOL TreatmentNoNon.a. (differs)No
Carryback (Years)00n.a. (differs)0
Carryback Cap$0$0n.a. (differs)$0
Carryforward (Years)020 (differs)n.a. (differs)15 (differs)
Carryforward Cap$0Unlimited (differs)n.a. (differs)Unlimited (differs)

Corporate Taxes: Treatment of Capital Investment

VariableCaliforniaArizonaNevadaOregon
Section 168(k) Expensing0%0%100% (differs)0%
Conforms to Section 163(j) LimitationNoYes (differs)NoYes (differs)
GILTI InclusionDecouplesDecouplesn.a. (differs)20% Inclusion (differs)
Section 174 ExpensingYesYesYesYes
Section 168(n) ExpensingNoNoYes (differs)Yes (differs)

Corporate Taxes: Other Corporate Base Variables

VariableCaliforniaArizonaNevadaOregon
Federal Income Used as State Tax BaseYesYesYesYes
Conformity StatusStatic (not current)Static (current) (differs)Rolling (differs)Rolling (differs)
Allows Federal ACRS or MACRS DepreciationNoYes (differs)Yes (differs)Yes (differs)
Allows Federal DepletionPartialYes (differs)Yes (differs)Partial
Throwback RuleYesNo (differs)No (differs)Yes
Foreign Tax DeductibilityNoNoYes (differs)No
Corporate AMTYesNo (differs)No (differs)No (differs)
Brackets Indexed for InflationFlat CITFlat CITGRT (differs)No (differs)

Individual Income Taxes: Individual Income Tax Rates

VariableCaliforniaArizonaNevadaOregon
Bracket 11.0% > $02.5% > $0 (differs)No Income Tax (differs)4.75% > $0 (differs)
Bracket 22.0% > $11,079n.a. (differs)n.a. (differs)6.75% > $4,550 (differs)
Bracket 34.0% > $26,264n.a. (differs)n.a. (differs)8.75% > $11,400 (differs)
Bracket 46.0% > $41,452n.a. (differs)n.a. (differs)9.9% > $125,000 (differs)
Bracket 58.0% > $57,542n.a. (differs)n.a. (differs)n.a. (differs)
Bracket 69.3% > $72,724n.a. (differs)n.a. (differs)n.a. (differs)
Bracket 710.3% > $371,479n.a. (differs)n.a. (differs)n.a. (differs)
Bracket 811.3% > $445,771n.a. (differs)n.a. (differs)n.a. (differs)
Bracket 912.3% > $742,953n.a. (differs)n.a. (differs)n.a. (differs)
Bracket 1013.3% > $1,000,000n.a. (differs)n.a. (differs)n.a. (differs)
Standard Deduction (Single Filer)$5,706$8,350 (differs)n.a. (differs)$2,910 (differs)
Personal Exemption (Single Filer)n.a.n.a.n.a.n.a.
Personal Exemption Credit (Single Filer)$153n.a. (differs)n.a. (differs)$256 (differs)
Personal Exemption per Dependentn.a.n.a.n.a.n.a.
Personal Exemption Credit per Dependent$476$125 (differs)n.a. (differs)$256 (differs)
Average Local Income Tax RateNoneNoneNone2.64% (differs)
Surtaxes on Wage Income1.3%n.a. (differs)n.a. (differs)0.1% (differs)

Individual Income Taxes: Marriage Penalty, Capital Income, Indexation

VariableCaliforniaArizonaNevadaOregon
Marriage PenaltyYesNo (differs)n.a. (differs)No (differs)
Married Couples Can File Separately on One ReturnNoNon.a. (differs)No
Convenience RuleNoNoNoNo
Interest TaxedYesYesn.a. (differs)Yes
Dividends TaxedYesYesn.a. (differs)Yes
Capital Gains TaxedYesYesn.a. (differs)Yes
Combined Capital Gains Tax Rate13.3%1.875% (differs)n.a. (differs)9.9% (differs)
Tax Brackets Indexed for InflationPartialYes (differs)n.a. (differs)Partial
Standard Deduction Indexed for InflationYesYesn.a. (differs)Yes
Personal Exemption Indexed for InflationYesYesn.a. (differs)Yes
Progressivity Ratio2.221.00 (differs)n.a. (differs)1.13 (differs)

Individual Income Taxes: Other Individual Base Variables

VariableCaliforniaArizonaNevadaOregon
Federal Income Used as State Tax BaseYesYesn.a. (differs)Yes
Conformity StatusStatic (not current)Static (not current)n.a. (differs)Rolling (differs)
Credits for Taxes Paid to Other StatesYesYesn.a. (differs)Yes
AMT LeviedYesNo (differs)n.a. (differs)No (differs)
Recognition of S Corporation StatusYesYesYesYes
Section 179 Expensing Limit$25,000$2,560,000 (differs)$2,560,000 (differs)$2,560,000 (differs)
TipsTaxableExempt (differs)n.a. (differs)Exempt (differs)
OvertimeTaxableExempt (differs)n.a. (differs)Exempt (differs)
Filing and Withholding Threshold Index0.8495 (differs)10 (differs)1.645 (differs)

Individual Income Taxes: Other Individual Income Variables

VariableCaliforniaArizonaNevadaOregon
Income RecaptureNoNon.a. (differs)No

Sales Taxes: Sales and Excise Tax Rates

VariableCaliforniaArizonaNevadaOregon
State Sales Tax Rate7.25%5.60% (differs)6.85% (differs)n.a. (differs)
Average Local Sales Tax Rate1.78%2.94% (differs)1.39% (differs)0.00% (differs)
Maximum Local Sales Tax Rate5.25%5.30% (differs)1.525% (differs)None (differs)
Gasoline Tax (Cents per Gallon)73.6419.00 (differs)24.81 (differs)40.00 (differs)
Diesel Tax (Cents per Gallon)92.9419 (differs)27.75 (differs)40 (differs)
Cigarette Tax (Dollars per Pack of 20)$2.87$2.00 (differs)$1.80 (differs)$3.33 (differs)
Beer Tax (Dollars per Gallon)$0.20$0.16 (differs)$0.16 (differs)$0.0839 (differs)
Spirits Tax (Dollars per Gallon)$3.30$3.00 (differs)$3.60 (differs)$23.74 (differs)
Vapor Tax Ratio to Cigarette Tax201.1118%n.a. (differs)78.50% (differs)170.0833% (differs)

Sales Taxes: Business-to-Business Exemptions

VariableCaliforniaArizonaNevadaOregon
Business InputsSome TaxableSome TaxableSome Taxablen.a. (differs)
Farm EquipmentPartialExempt (differs)Exempt (differs)n.a. (differs)
Office EquipmentTaxableTaxableTaxablen.a. (differs)
Manufacturing MachineryPartialExempt (differs)Taxable (differs)n.a. (differs)
Manufacturing Raw MaterialsExemptExemptExemptn.a. (differs)
Business Fuel and UtilitiesTaxableExempt (differs)Taxablen.a. (differs)
Business Leases and RentalsTaxableTaxableTaxablen.a. (differs)
Information ServicesExemptExemptExemptn.a. (differs)
Software as a Service (SaaS)ExemptTaxable (differs)Exemptn.a. (differs)
Platform as a Service (PaaS)ExemptTaxable (differs)Exemptn.a. (differs)
Digital B2B ProductsExemptExemptExemptn.a. (differs)
Payroll ServicesExemptExemptExemptn.a. (differs)
Data Center PurchasesTaxableTaxablePartial (differs)n.a. (differs)
Digital Advertising TaxNoNoNoNo

Sales Taxes: Consumer Goods and Services in the Base

VariableCaliforniaArizonaNevadaOregon
GroceriesExemptExemptExemptn.a. (differs)
ClothingTaxableTaxableTaxablen.a. (differs)
Prescription MedicationExemptExemptExemptn.a. (differs)
Nonprescription MedicationTaxableTaxableTaxablen.a. (differs)
GasolineAlternate RateExempt (differs)Exempt (differs)n.a. (differs)
LandscapingExemptTaxable (differs)Exemptn.a. (differs)
Repair ServicesExemptExemptExemptn.a. (differs)
Real Estate ServicesExemptExemptExemptn.a. (differs)
ParkingExemptTaxable (differs)Exemptn.a. (differs)
Dry CleaningExemptExemptExemptn.a. (differs)
Fitness ServicesExemptTaxable (differs)Exemptn.a. (differs)
Barber ServicesExemptExemptExemptn.a. (differs)
Veterinary ServicesExemptExemptExemptn.a. (differs)
E-BooksExemptTaxable (differs)Exemptn.a. (differs)
Streaming VideoExemptTaxable (differs)Exemptn.a. (differs)
Medical ServicesExemptExemptExemptn.a. (differs)
Legal ServicesExemptExemptExemptn.a. (differs)
Financial ServicesExemptExemptExemptn.a. (differs)
Accounting ServicesExemptExemptExemptn.a. (differs)
Sales Tax HolidayNoNoYes (differs)n.a. (differs)

Sales Taxes: Sales Tax Structure

VariableCaliforniaArizonaNevadaOregon
Uniform Base DefinitionsYesNo (differs)Yesn.a. (differs)
Unified Tax AdministrationYesYesYesn.a. (differs)
Safe Harbor for Remote SellersGross Sales ThresholdGross Sales ThresholdSales or Transactions Threshold (differs)n.a. (differs)

Property Taxes: Property and Capital Stock Tax Rates

VariableCaliforniaArizonaNevadaOregon
Property Tax Collections per Capita$2,492$1,269 (differs)$1,582 (differs)$2,108 (differs)
Property Tax as a Percentage of Personal Income2.88%1.92% (differs)2.26% (differs)2.97% (differs)
Assessment LimitYesYesNo (differs)Yes
Levy LimitNoYes (differs)Yes (differs)No
Capital Stock Tax RateNoneNoneNoneNone
Capital Stock Tax Maximum Paymentn.a.n.a.n.a.n.a.
Payment Options for Capital Stock and Corporate Income Taxesn.a.n.a.n.a.n.a.

Property Taxes: Property Tax Bases

VariableCaliforniaArizonaNevadaOregon
Tangible Personal Property TaxYesYesYesYes
Tangible Personal Property De Minimis ExemptionNone$500,000 (differs)NoneNone
Intangible Property TaxNoNoNoNo
Inventory TaxNoNoNoNo
Real Estate Transfer TaxYesNo (differs)YesNo (differs)
Split RollNoYes (differs)NoNo
Split Roll Ratio1.001.55 (differs)1.001.00
Estate TaxNoNoNo16% (differs)
Inheritance TaxNoNoNoNo
Gift TaxNoNoNoNo

Unemployment Insurance Taxes: UI Tax Rates

VariableCaliforniaArizonaNevadaOregon
Minimum Rate1.60%0.03% (differs)0.30% (differs)0.90% (differs)
Maximum Rate6.20%8.36% (differs)5.40% (differs)5.40% (differs)
Taxable Wage Base$7,000$8,000 (differs)$43,700 (differs)$56,700 (differs)
Most Favorable Schedule: Minimum Rate0.10%0.02% (differs)0.25% (differs)0.50% (differs)
Most Favorable Schedule: Maximum Rate5.40%5.40%5.40%5.40%
Least Favorable Schedule: Minimum Rate1.50%0.02% (differs)0.25% (differs)2.20% (differs)
Least Favorable Schedule: Maximum Rate6.20%5.40% (differs)5.40% (differs)5.40% (differs)
Employer Contributions as a Share of Total Wages0.33%0.20% (differs)0.97% (differs)1.19% (differs)
Employer Contributions as a Share of Taxable Wages3.22%1.25% (differs)1.70% (differs)1.95% (differs)
Trust Fund Solvency Ratio00.9 (differs)0.83 (differs)2.46 (differs)
New Employer Rate3.40%2.00% (differs)2.95% (differs)2.40% (differs)

Unemployment Insurance Taxes: Experience Formulas and Charging Methods

VariableCaliforniaArizonaNevadaOregon
Experience Formula Based OnReserve RatioReserve RatioReserve RatioBenefits Ratio (differs)
Benefits Charged in Proportion to Base-Period WagesYesYesNo (most recent or principal employer) (differs)Yes
Charged If Employee's Benefit Award Is ReversedNoNoYes (differs)No
Charged for Reimbursements on Combined Wage ClaimsYesNo (differs)No (differs)No (differs)
Charged If Employee Left VoluntarilyNoNoNoNo
Charged If Employee Was Discharged for MisconductNoNoNoNo
Charged If Employee Refused Suitable WorkYesYesYesYes
Charged If Employee Continues to Work Part-TimeNoNoYes (differs)No

Unemployment Insurance Taxes: Other UI Base Variables

VariableCaliforniaArizonaNevadaOregon
Solvency TaxYesNo (differs)No (differs)No (differs)
Taxes for Socialized Costs or Negative Balance EmployersNoNoNoNo
Loan and Interest Repayment SurtaxesNoYes (differs)Yes (differs)Yes (differs)
Reserve TaxesNoNoNoNo
Surtaxes for UI Administration or Non-UI PurposesYesNo (differs)YesYes
Temporary Disability InsuranceYesNo (differs)No (differs)No (differs)
Voluntary ContributionsYesYesNo (differs)No (differs)
Years to Qualify for Experience Rating32 (differs)31 (differs)

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About the Authors

Janelle Fritts Tax Foundation
Expert

Janelle Fritts

Senior Policy Analyst

Janelle Fritts is a Senior Policy Analyst with the Tax Foundation’s Center for State Tax Policy. She is the lead researcher on the annual State Tax Competitiveness Index and serves as a resource to policymakers in their efforts to modernize and improve the structures of their state tax codes. Her work has been cited in The New York Times, the Associated Press, Bloomberg, and numerous state media outlets across the country.

Jared Walczak Tax Foundation
Expert

Jared Walczak

Senior Fellow

Jared Walczak is a Senior Fellow at the Tax Foundation, where he spent five years as Vice President of State Projects, and president of Walczak Policy Consulting.

Nicole Fox Tax Foundation
Expert

Nicole Fox

Policy Analyst

Nicole Fox is a Policy Analyst with the Center for State Tax Policy at the Tax Foundation, where she serves as a resource to policymakers in their efforts to modernize and improve the structure of their state tax codes.

Katherine Loughead Tax Foundation
Expert

Katherine Loughead

Vice President of State Tax Policy

Katherine Loughead is the Vice President of State Tax Policy at the Tax Foundation, where she oversees the state tax policy team’s research agenda and serves as a resource to policymakers in their efforts to modernize and improve the structure of their state tax codes.

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Sarah Wilbur

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Sarah Wilbur is Communications Manager at the Tax Foundation where she advances the organization’s institutional reach by developing its corporate communications and media programs.

Jesse Solis Tax Foundation

Jesse Solis

Vice President of Communications

Jesse Solis is Vice President of Communications at the Tax Foundation, where he leads the communications team and works to build coverage of Tax Foundation’s experts and their work across the globe. He joined the team in 2021 as Communications Manager and became Communications Director in 2024.