How California's income tax and sales tax rates compare

We're No. 1 -- only more so.

The budget deal the Legislature reached today will keep California's top personal income tax rate and sales tax rate the highest in the Union.

The agreement will raise personal income tax rates by 0.25 of a percentage point across the board, beginning with the current tax year. The highest rate, on taxable income of more than $1 million, will rise to 10.55% from 10.3%.

The next-highest tax rate, on taxable income of more than $94,110 for a married couple filing jointly, will rise to 9.55% from 9.3%. For singles, the threshold for the new 9.55% tax rate is $47,055.

The 0.25-point hike could be reduced to 0.125 of a point depending on how much federal help the state gets as part of Congress' economic stimulus package.

Among the 50 states as of Jan. 1, Rhode Island had the second-highest marginal income tax rate, at 9.9%, according to the Tax Foundation. That applied to taxable income above $357,700 for single filers. Vermont was No. 2 at 9.5%. Iowa, New Jersey and Oregon had top rates of about 9%, kicking in at varying income levels.

New York’s highest tax rate was 6.85%, but that’s misleading: It applies to income exceeding $20,000 for single filers, so it’s a greater burden on even low-income earners compared with many other states’ tax regimes.

As for sales taxes, the budget deal will push California’s base rate to 8.25% from the current 7.25%. Those rates don’t include taxes added by individual cities and counties.

The next highest state sales tax rate as of Jan. 1 was 7%, which was shared by Indiana, Mississippi, New Jersey, Rhode Island and Tennessee. Note, though, that sales tax burdens aren't uniform because some states tax food while others, including California, don't. (See a full state-by-state list of sales taxes here.)

Nearly all states are facing huge budget deficits this year that are likely to result in higher taxes. So California's new rates may not stick out as much, by comparison, as other states act. And Californians, of course, face much lower property tax burdens than residents of many other states, relative to home values.

By one measure, at least, California isn’t No. 1 in taxes overall: A Tax Foundation study last year that looked at the combined state and local tax burdens shouldered by Americans ranked the Golden State No. 6, after New Jersey, New York, Connecticut, Maryland and Hawaii.

In case that makes anyone feel better.

-- Tom Petruno

Comments

[Kate]

How do we compare with other states in property tax?

[Phil]

Our property taxes are average to below average (Prop 13) and our gas taxes our average to below average as well. Not much to crow about but the media always paints the worst picture.

[Doug]

How about the overall tax rate, including property taxes?

[ben]

what Kate said

[Mike N]

I love it. The Times (what a great bastion of non-partisan reporting...HAH!) declines to publush the fact that that this deal will make California the state that steals the most from its constituents, until AFTER the vote. What scumbags. This is why I canceled my subscription long ago. Everyone else should do the same. Remember, you can stil get good sports from ESPN. And, aside from that, why would anyone still buy this rag?

[Tom Petruno]

@Kate et al: I added a link to a study on property taxes by state. Thanks to Prop. 13, of course, property taxes generally are lower in California than in many other states.

[Rod]

Phil gets it! Although Californians pay higher taxes on personal income and consumption, property owners (commercial and residential) pay below average property taxes, especially those that have own property for more than ten years.

No one wants to have a honest discussion about the sacred cows - Proposition 13 and pension benefits for police and fire.

[Brian]

I think that a lot of people on here are missing the point. This budget debate is about economic competition and the hard facts are that California has is no longer competitive in the global market. High taxes, labor costs, and declining infrastructure and public education has resulted in a situation where businesses are forced to leave the Golden State in order to meet expanding global and interstate competition. When these firms leave, so do the middle class jobs and the workers. This is most evident in the disappearance of the middle class in the once prominent San Fernando Valley near Los Angeles and the exportation of "Hollywood" to states like Arizona, Utah, New Mexico, and Texas...where the state governments provide generous tax incentives to lure production companies to their states.

Personally, I applaud the Republicans for taking a stand against the irresponsible State Legislature of California, even though they were a major part of the spending that caused the problem. As a citizen of California, I am sick of paying ridiculous taxes and getting nothing out of it. High taxes used to be justifiable because we got a lot out of it. Now, things are different. All we have to show for this mess is a crumbling infrastructure, failing schools, horrid health care, and an abused social welfare system. Our money is being wasted; plain and simple. The citizens of California deserve more.

P.S. Los Angeles has a city-wide election on March 3, 2009. We need to fire the city government that has failed and elect new, motivated individuals that are interested in promoting the interests of the state rather than themselves. And as they say, the blame starts at the top. Antonio Villaraigosa needs to go.

[Drew]

Technically the Times is correct that California has the highest state sales tax because it doesn't consider the District of Columbia, where the sales tax is 10%.

[Bart Anderson]

When are the citizens and politicians of this state going to wake up and revisit the part of Prop 13 that would raise property tax rates on mega wealthy commercial property owners. We have been living with this fraud for too long. The California of my youth is gone...quality government services for all, great public schools etc. The sales tax increase is a bad idea when there is a more sensible option, but these gutless politicians won't even discuss it because they are bought and paid for.

[JohnRJ08]

Percentage-wise, our property taxes are relatively low. But because property values in many parts of the County are so high, the percentage adds up to a pile of money.

[Richard]

Bend over Californians the democrats are back !

[JohnRJ08]

Ben, you're forgetting that this deal was pushed by a Republican governor. You're also forgetting that it was either do this or go bankrupt. Some of you conservatives are locked onto your stupid ideology that you would burn the barn to keep the horses warm.

[Jason]

Another interesting point that very few think of is that while many in the state have hoped to "sock it to the rich" that plan hasn't worked as well as hoped. For example, many very wealthy people maintain primary residences in states without income taxes, like Nevada, even though they spend most of their time here. On the outskirts of Las Vegas, there are developments of beautiful, empty homes, owned by the very wealthy to help reduce their taxes.

My point in all of this is that when the tax rates get too high, the people negatively affected by this leave. This will accelerate now.

[nathan]

Property taxes are only lower for those who bought 20 years ago. I pay over 5K in property taxes a year, but have neighbors who bought 30 years ago paying only $800 to a thousand. Sure, they're getting a great deal, but I certainly am not.

These new taxes will cost my family over $1800 a year more. That's $150 less per month that I have to spend helping the California economy. I have already told my kids that we are not spending money eating out and that their after school activities will have to be restricted. We simply refuse to go into debt to keep our livestyle the same as it was before this massive tax increase.

[Shawn]

Why does The Times keep promoting the idea that higher taxes is a good thing? It's like the Los Angeles Times isn't a newspaper but the PR machine for the tax and spend democrats in California. Plain and simple the increase in taxes are going to hurt people and no Tom once the sales (especially in LA County at 10%) and the car tax come due no one is going to feel better.

[M]

I could also easily buy a house/property in almost any large city outside of California for what I pay in rent here in LA. A house means property tax, but it also means tax benefits. Funny how that works....

[pong]

nathan, too bad so sad. i am in the same boat. this is real hard times. everyone gets their fair share. except those who gets more tax cuts. courtesy of my party.

[mike]

We don't have the highest tax burden, we were only at number six. Maybe in another few months the pols in Sac can try and make us number one. That sure would be something for them to shout from the roof tops at election time wouldn't it?

[Tom Petruno]

@Shawn: I certainly hope you aren't suggesting that this blog item is glorifying higher taxes in California.

Tom Petruno

[pong]

M, let's see. you could do that, buy a property outside of california and stay here, pay taxes here and the state where you bought the property. good for you. you can go to detroit, for example and buy a house for less than 50k and live off your savings. just don't bother getting a good paying job.

[Jason]

The question for us is what kind of California do we want? I personally want a California with good roads, good schools, clean air, good public parks/beaches and good opportunities for Californians. These things aren't free, but I'm willing to pay for them.

[cbk16]

By one measure, at least, California isn’t No. 1 in taxes overall: A Tax Foundation study last year that looked at the combined state and local tax burdens shouldered by Americans ranked the Golden State No. 6, after New Jersey, New York, Connecticut, Maryland and Hawaii.
-----------------
All the high tax states are Democrat states, no surprise.

[Bruce]

tax and spend is worse than borrow and spend?

[FLAT TAX]

Its time for a FLAT TAX

[bruce]

its time for a FAT TAX

[Martin]

This is an inflammatory, misleading article. Prop 13 changes the balance of taxation; our income taxes are higher because our property taxes are lower. Yes, the article mentions property taxes - but only in passing - this article obnoxiously misrepresents the truth, by knowingly presenting facts out of the larger context.

[jojo]

"...revisit ...Prop 13 that would raise property tax rates on mega wealthy commercial property owners. We have been living with this fraud for too long. The California of my youth is gone."

Agree it's gone Bart but i'd personally we revisit another proposition.....187.

[juan]

My accountant died and the Franchise Tax Board hit me for over 100 percent tax for more than one year. Then they lent a deaf ear. Do not trust them.

[mike]

"High taxes, labor costs, and declining infrastructure and public education has resulted in a situation where businesses are forced to leave the Golden State in order to meet expanding global and interstate competition. "

You hear this claim repeated endlessly, but it is quite simply not true. The most prosperous companies in the country are in California, or at least on the west coast: Google, Apple, the rest of Silicon Valley, the movie companies, etc., etc. In fact, with the exception of Walmart, virtually all of the major corporations in the country now that are actually making money are in California. This is particularly true for those companies that have been successful in competing in the global marketplace. This is because higher taxes support better educational systems, and more effective infrastructure. These are essential to a modern economy, and are a major reason that California is so well off. Another reason is the high level of immigrants here, which brings greatly needed new ideas and additional investment to the state, along with very, very valuable business contacts throughout the rest of the world. The fact is that, if you want to compete in the global marketplace, you really have to be here. There isn't much choice.

These are the reasons that 10% of the people in this country choose to live here. It simply is the best and most prosperous place to be. California not only has the highest standard of living in the country, it has the highest in the world. If we didn't have to subsidize the rest of the country we'd be doing even better. But we're still doing great. Without the millstone of the union around our necks we'd have a surplus of well over $100 billion, not a $40 billion dollar deficit.

And if so many people are leaving California, then why the heck does the population continue to grow???

"All the high tax states are Democrat states, no surprise."

No, no surprise at all. The high tax states are the most prosperous states, with the highest levels of personal income. (A documented fact and very easy to check.) And it is also these states that pay the lion shares of federal taxes, and in effect subsidize those states that don't have realistic tax policies. The states with low taxes only survive because of the generosity of the blue states. Without that they'd be even worse off than they are now.

[i6re]

These new taxes will cost my family over $1800 a year more. That's $150 less per month that I have to spend helping the California economy. I have already told my kids that we are not spending money eating out and that their after school activities will have to be restricted. We simply refuse to go into debt to keep our livestyle the same as it was before this massive tax increase.

Posted by: nathan | February 19, 2009 at 03:11 PM

Too bad the politicians don't life by Nathan's rule. You have to cut back when you don't have the money! Instead, the pols borrow, tax, and keep spending like there is no tomorrow.

[Schimpff]

California state government has increased by 40% in the last six years. And the Democrats absolutely refused to cut the payroll.

[Tom]

Jason said:
"The question for us is what kind of California do we want? I personally want a California with good roads, good schools, clean air, good public parks/beaches and good opportunities for Californians. These things aren't free, but I'm willing to pay for them."

Good roads? Where?
Good schools? If they keep cutting education, we will be worse off than any third-world country. California's schools are in the worst shape of all the states...and California is supposed to be viewed as a leader??
Clean air? Yeah, I really enjoyed seeing all the smog on the horizon this morning.

Seriously, it's time for the California government to go through their own restructuring and lay-off the thousands of unmotivated government employees and make the state work a bit more efficiently like all of us in the private sector. For God's sake, stop cutting education!!!!

[bc1358]

Arnold is a traitor and moral coward as are the Dems and Republican who supported this abomination of a budget. We are the most heavily taxed state in the country. When will left-wingers realize you don't create jobs or prosperity by spending and taxing. I will gladly leave this state when I retire. I was born here and this is not the state I want to live in any longer.

[JS]

Now the times puts a comments section with an article about the budget? This is laughable. We're sunk. This new budget will be short billions in tax revenue before the paint is dry on Arnie's pen signing. But hey, we get to "vote" on some of it.

What kind of fools increase taxes heading into a DEPRESSION? Fools who won't be in office much longer, that's who. This budget is going to look so ridiculous over the next few months as the economy falls off the cliff.

[Dan W.]

Great. We're ranked 45th comparing property tax and percentage of home value.

It's time to overhaul Prop. 13

[Dave]

In response to Jason's comment: "The question for us is what kind of California do we want? I personally want a California with good roads, good schools, clean air, good public parks/beaches and good opportunities for Californians. These things aren't free, but I'm willing to pay for them."

I agree! However, we pay some of the highest taxes here in LA and we have HORRIBLE schools, dirty air, crumbling roads, dirty beaches, and some of the highest unemployment in the country!

Clearly something isn't working here!

[MJ]

Our governor isn't a real Republican. He's a Democrat in Republican's clothing. He's also married to a Kennedy.

[Ken P.]

Having the highest taxes and the biggest government hasn't meant the best state products or services. Look at our schools, for instance. No wonder people are leaving the state in droves. If we keep acting like a European country, we'll start seeing what that means: high unemployment, decling incomes, no opportunity for entreprenuers, and a population decline. Last one out turn off the lights.

[adam dunns]

If it wasn't for Prop 13 the state would steal more money from the hard working and responsible, a dysfunctional Robin Hood stealing from those who contribute to society to give to those who suck us dry.

When will it ever end?

[Jim Badger]

The property tax median is somewhat misleading (lies, damn lies and statistics). For instance, my family doun-sized our home in 2007, in part to raise cash for anticipated college expenses for our kids. We accomplished the goal but in doing so had to pay increased prop 13 taxes, whereas those fortunate to be able to stay in their homes for many years have low taxes. Our prop 13 taxes in 2008, on a very modest home in San Diego (the home was under 1000 square feet in a mixed not affluent area) approached $6000 per year). I wonder how many people caught up in the mortgage crisis who lost their homes to foreclosure could have saved their homes but for the uneven taxation delivered by the prop 13 regime? I also wonder whether the State government's crisis would be so aggravated if a more evenly distributed property tax were in place?

[Daniel]

Fantastic idea, lets repeal prop 13, so we can have the highest property taxes in the nation to go with our highest income and sales taxes. Anyone who really thinks this is a good idea, is a complete idiot.

[DRE DAWG]

My position and value as a Californian is that of an ATM Machine. Politicians ignore me when I scream about public education, public infrastructure, and public transit. But when Politicians overspend and find themselves in a deep deficit, they love me! They love my money and they love that they have direct access to my salary to get my money.

As they steal my money to fill up the hole they themselves dug, I will be cutting back on my expenses: no more seeing movies at the theaters, no more dinners out, no more shopping splurges, no more "extras" like a cup of coffee, a book, or an ice cream. Basic, inexpensive meals at home. No more unnecessary driving.

Ironically, I will be forced to do the exact thing our government should have done...Cut Back Spending!!!! I did nothing wrong, however I, and the rest of my fellow Californians, will have to fork over an average of $1,400 in taxes. It's not right.

Jason: the point is that we aren't getting all those good things you're so willing to pay for cuz obviously it not a money issue, it's an efficiency issue. If we're the highest in almost all tax categories but business, then why aren't we already getting quality public roads, schools, air, better jobs and parks/beaches???

The Politicians got their free pass again and we citizens got screwed again.

[Alan Noble]

Your comment on California's low property tax is not honest. True California has a low property tax rate, but California also has the highest median home value. The net result of a low tax rate on a high home value puts California among the highest for actual property tax.

[Mighty Mighty]

To help balance the California budget, they should just legalize all the illegal aliens in California. Have these people pay income taxes. A lot of these people are sucking dry all the free public services paid for by California tax payers anyway. It's time these people are demanded to pay for the free services they enjoy. Either that or cut the services to those who cannot show any proof of legal residency. Of course California being an immigrant-friendly (iilegal or not) state wouldn't want to do the latter. Every 10 illegals could have at least 1 legal relative and I'm sure the politicians would like those votes as much as possible. So just legalize them.

[Red]

California is a HUGE piece of real estate that is on FIRE 6 months out of the year. The folks who work for those pensions you complain about work all of their careers for a MUCH lower salary than they would otherwise receive in the private sector with THEY UNDERSTANDING that they will make this up in their retirement with a solid pension! You try to live in California on a teacher's cops annual salary! Or would you rather not have teachers or police? Go ahead...privatize it all...and then try to PAY a COMPETITIVE PRIVATE SECTOR SALARY to those folks to put out your fires, teach your kids and show up when you've been robbed.

FINALLY....don't dare try to push this off on the cheap Hispanic labor you all so enjoy. I spent my life in CA and recently moved to North Carolina where it costs between $350 - $400 PER MONTH to hire a *gardener* to mow my lawn - and that is IT - they don't do ANYTHING else! You're going to pay one way or another....either through state services to support them or by forking out $400 per MONTH to have a guy mow your lawn!

And where were all of the *FISCALLY RESPONSIBLE* Republicans when the BUSH admin was running our deficit into the stratosphere???? Would have been helpful to have heard from you over the past 8 years! I lived in REPUBLICAN THOUSAND OAKS where I was SURROUNDED by right wingers who were right in there BORROWING on homes they couldn't afford and against their homes to take trips and by cars they couldn't afford and are NO DOUBT now in line to take MY TAX DOLLARS to BAIL THEM OUT. Funny thing...all the **LIBERALS** I know lived WELL within their means over the past 8 years. It was only the Republicans in my midst who ffelt the need to overspend to keep up appearances of being *in that GOP Club*. Pathetic, all of you.

[MikeW]

This budget compromise is a joke. Not one cut made to the bloated, overpaid, underworked bureaucrats. And no one wants to acknowledge the elephant in the tent - the enormous cost of illegal immigrants has on our social welfare system. When the tide goes out, you get to see who's skinny dipping. I really believe this time we won't be able to dodge the bullet. The bill has come due, the day of reckoning has arrived. The books will get back in balance and all the machinations of the spineless politicians won't make a whit of difference. Be prepared.

[gerrrg]

@ everyone in California. The Tax Foundation's rates are based on all sales, personal income and property taxes, as well as broken down to taxes paid to out-of-state.

What I found intriguing, is that I had thought the states with highest foreclosure rates would also hold the highest unemployment rates, but this is not so. For at least a brief examination of 4 western states (AZ, CA, OR, WA), it turned out that the unemployment rate had a much stronger correlation to the total tax bite than foreclosure rates...which was NOT what I was expecting. I don't know if that holds true for all 50 states, but it would be quite an interesting theory to test.

[Steve]

All I cam say is thank God I left CA 15 years ago. This just one more band aid until the next economic collapse 4 years from now. What a joke.

[Frank]

I used to live in California. Oh yeah... now I remember why I moved.