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How California's income tax and sales tax rates compare

February 19, 2009 |  1:28 pm

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.

California_state_flag 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

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