Total California Tax Revenue in Fiscal Year 2006

The Sources of California’s Tax Revenue, Fiscal Year 2006

The day that the typical California taxpayer has worked enough to pay their total annual tax bill and can start working for themselves instead of for the government.
Source: Tax Foundation

The richest 10% of earners pay nearly 75% of the entire income tax in the state, and most of these are small-business owners
(Source: California Taxpayers Association).

California has the highest upper marginal personal income tax rate in the United States – 10.3%. In 2004, California’s individual income tax collections were $1,016 per person, which ranked 8th-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 (Source: Tax Foundation). Nationally, tax-compliance costs per employee are 67% higher in small businesses than in large businesses (Source: U.S. Small Business Administration).

The state’s second-highest personal income tax bracket (9.3%), collected on those earning only $43,467 or more in taxable income, ranks below only Vermont’s 9.5% rate (Source: Reason Foundation).

California has seven personal income tax brackets. Only six other states have more personal income tax brackets (Source: Pacific Research Institute calculations based on Tax Foundation data).

California has the highest state sales tax rate in the United States (7.25%) (Source: Retirement Living)

California’s 8.84% flat corporate income tax rate is the highest corporate tax rate in the West (10.84% on financial institutions). Nationally, only 11 states have a higher top corporate income tax rate than California. In 2004, corporate tax collections in California were $193 per capita, which ranked 7th-highest nationally. The minimum corporate income tax is $800 per corporation. (Source: Tax Foundation).

California’s business tax climate ranks 45th, according to the State Business Tax Climate Index. The Index compares the states in five areas of taxation that impact businesses: corporate taxes; individual income taxes; sales taxes; unemployment insurance taxes; and taxes on property, including residential and commercial property (Source: Tax Foundation).

California is a net donor state to the federal government: California taxpayers receive less federal funding per dollar of federal taxes paid than the average state. In 2004, California taxpayers received only 79 cents in federal expenditures for every dollar in federal taxes (8th worst). In 1992, by contrast, California taxpayers were receiving 93 cents in federal expenditures for each dollar of federal taxes. This is yet another example of the rise in taxes in the state of California (Source: Tax Foundation).

Californians pay an additional hidden “economic oppression” tax of $1,180 per year. If California’s tax, regulation, and legal climate were the same as Kansas — the most economically-free state in the country — each Californian would receive $1,180 more income per year from the resulting increased economic activity. In other words, oppressive state taxes and regulations cost Californians an additional $1,180 per year above the official state and local tax bill they already paid of $4,451 — an additional 27% economic oppression tax (Source: Pacific Research Institute).