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 16 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 2011, California taxpayers work until April 16 to pay their total tax bill (ranked 6th highest nationally), 4 days later than national Tax Freedom Day (April 12). The Tax Freedom Days of neighboring states were: Oregon, April 8 (ranked 23rd nationally); Nevada, April 2 (ranked 40th nationally); and Arizona, April 2 (ranked 39th nationally).
Full study of Tax Freedom Day, nationwide and in each state
California's State and Local Tax Burden Above National Average
California's 2009 state and local tax burden of 11.8% of income is above the national average of 9.8%. California's tax burden has decreased overall from 11.8% (5th nationally) in 1977 to 10.6% (6th nationally) in 2009. Californians pay $4,910 per capita in state and local taxes.
California's State and Local Tax Burden, 1977-present
Other States' State/Local Tax Burdens
Map of U.S. Showing all State's Burdens and Ranks
Historical Chart Comparing All States' State/Local Tax Burdens from 1977 to 2009
California's 2012 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 (7th), Oregon (13th), Arizona (27th), Nevada (3rd) and Hawaii (35th).
50-State Comparison of Business Tax Climates (data only)
2012 State Business Tax Climate Index, Ninth Edition (full study) .
California's Top Individual Income Tax Rate Is Third-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 third-highest rate and one of the most highly progressive structures in the nation. In 2009, California's state-level individual income tax collections were $1,206 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 8 states have a higher top corporate tax rate than California. In 2009, state-level corporate tax collections (excluding local taxes) in California were $259 per capita, which ranked 5th 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 Is Highest in the Nation
California levies an 8.25% general sales or use tax on consumers, which is the highest in the nation and above than the national median of 6%. The average local sales tax rate in California is 0.83%. In 2008 combined state and local general and sales tax collections were $1,129 per person, which ranks 13th highest nationally. California's statewide gasoline tax stands at 47.7 cents per gallon and is the highest in the nation, while its cigarette tax stands at $0.87 per pack of twenty (32nd highest nationally).
State & Local Sales Tax Rates (As of July 1, 2011)
State and Local General Sales Tax Collections Per Capita, Fiscal Year 2008
State Excise Tax Rates on Spirits, Table Wine, Beer, Gasoline, and Cigarettes
Property Tax Collections Slightly Above 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. California collected $1,449 per capita in state and local property taxes in fiscal year 2008, which ranks 14th highest among all states.
State and local 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
