With tax time upon us, this seems an appropriate time to be enlightened as to exactly how much of your money is consumed by your government, particularly in comparison to other states.
Do you ever feel like maybe you are paying more for just about everything because you live in California? Unfortunately, it is not your imagination - and all of those nickels and dimes add up quickly, as you can see for yourself.
(All sources are referenced below.)
Income tax: California has by far the nation’s highest state income tax rate. We are 21% higher than second place Hawaii, 34% higher than Oregon, 47.8% higher than the next two states, and significantly higher than all the rest – including 7 states with zero state income tax.i California is also one of only 16 states that penalizes married couples with a higher tax rate.ii
Sales tax: California has the highest state sales tax rate in the nation at 7.5 percent, not including additional local sales taxes. Incorporating local sales tax, we average eighth highest nationwide.iii
Vehicle-Related Taxes and Fees: California has the second-highest vehicle-related taxes and fees estimated at $1,809 per year,iv $765 higher than the national average, which includes our highest-in-the-nation gasoline tax rate of 71.6 cents per gallon. (The State Board of Equalization recently voted to reduce the gasoline tax by 3.5 cents a gallon effective July 1.) Our gasoline taxes are far above the national average of 49.5 cents a gallon.v California also has the nation’s third highest diesel tax – 77.0 cents/gallon. The national average is 54.8 cents.
Capital Gains: Capital gains taxes represent a tax on a dollar of income that has already been taxed multiple times. California ranks the highest with a 13% tax rate, 250% higher than the national average of 5.1% and 24% higher than the next highest taxed state – Oregon (9.9%). Nine states have no capital gains tax at all, allowing those revenues to flow directly back into the economy.
Timber Taxes: On January 1, the state began collecting a 1% gross receipts tax on timber products at the retail level, in addition to sales tax, expected to bring in $30 million to the state annually. Watch for a separate line-item on your receipt.vi
Alcohol taxes: (per gallon) Beer and Wine (29th and 43rd nationwide, respectively): $.20vii Spirits (less than 100 proof): $3.30,viii (over 100 proof) $6.60 (38th nationwide).ix This is one of the few taxes where we don’t rank at or near the top.
Tobacco taxes: California charges 87 cents per pack of cigarettes at the distribution level, and sales tax is affixed to the entire price – a tax on a tax. The federal cigarette tax rate adds another $1.01 per pack after President Obama signed a 62-cent increase into law in 2009 for a grand total of $1.88 per pack.x We rank 32nd.
Annual state and local tax burden (as a percentage of state income): For 2010 (pre-Prop. 30), California ranked fourth in the nation behind New York, New Jersey and Connecticut and consuming 11.2 percent of Californians’ income, about $5,000 per capita.xi
Corporate Taxes: California imposes an $800 minimum corporate income tax, even if no profit is earned, and even for many nonprofits. The next highest state’s minimum tax rate is Oregon at $150. Most states don’t have one. California’s corporate income tax rate is the highest west of the Mississippi (our economic competitors) except for Alaska at 8.84%.xii
Workers’ Compensation: Workers’ Compensation costs are the third highest in the nation, and an average 3.4% increase in those rates is anticipated in 2014.xiii
Business Flight: In 2012, California saw a 5.2% net loss of businesses over the previous year, a rate 67% higher than the second worst state.xiv
Out-migration: California loses about 225,000 people a year due to out-migration, a net loss of approximately 3.4 million since 1990.xv Between 2000 and 2010, the cost of out-migration cost California $29.4 billion – the second worst loss in the country – just behind New York.xvi
Business Losses: California small businesses failed in 2011 at a rate 69% higher than the national average — the worst in the nation.
Business Climate: Third worst business climate in the nation, better only than New York and New Jersey according to the Tax Foundation.xvii Chief Executive Magazine ranked California dead last for the ninth year in a row. Even our qualified workforce and great weather cannot begin to overcome our negatives: high taxes, fees, workers’ compensation premiums, excessive regulations, adversarial government bureaucracy and high energy costs.xviii
Unemployment: As of August, 2013, California has the fifth worst state unemployment rate at 8.9%, 25.7% higher than the average of the other 49 states.xix
Employment Distress: California has the second highest level of employee distress, characterized as the number of workers thwarted by economic conditions.xx
Spending: Between 2001 and 2011, California’s state government spending increased by 35.4% (after adjusting for inflation and population growth).
Education Spending: California's ranks 39th in per-pupil spending.xxi
Credit Rating: California has the second worst credit rating in the nation – after Illinois.
State Employees: As of 2011, California had the fifth-lowest number of state employees per capita at 476 per 10,000; however, those employees are also the highest paid at an average annual salary of $70,777, even higher than second-place New York.xxii For the same year, California employees earned the most among the 12 most populous states in every category, including wages, overtime, extra-duty and one-time lump sum payments.xxiii
Welfare Spending: California has 12% of the population and 34% of the nation’s welfare population. One in five in Los Angeles County is on public aid.xxiv California is third-highest in per capita spending on welfare at $179. xxv
State Debt: California is carrying more than $617 billion in debt, more than twice that of the #2 state – New York – that owes a relatively paltry $300 billion.xxvi On the bright side, that amounts to about $3,900 per person – 20th using that measure.xxvii
California as a Retirement Destination: California is ranked the second worst state in the nation in which to retire for obvious reasons, beating out Illinois only because of better weather.xxviii
Housing Impact Fees: For 2012, the average collective impact fee for a single-family residence was $31,100, 90% higher than next worst state. 265% higher than jurisdictions that levy such fees (many governments east of the Sierras do not). For apartments, fee averaged $18,800, 290% above average outside state. The fee is included in the purchase price, so the buyer pays property taxes on the fees.xxix
State Responsibility Area (SRA) Fire Fees: Specifically directed to support “fire prevention,” a portion of the SRA Fire “Fee” (which by definition qualifies as a tax) has been redirected to civil cost recovery associated with fire liability, a direct violation of legislative intent. In October, the Department of Forestry and Fire Protection increased from $150 to $152.33. $47.2 million has been collected and 13,000 appeals have been received. Litigation is pending.
Cap and Trade Fees: California has the only such tax in the nation. Per-household cost of this tax is estimated to reach an average of $3,857 per household by 2020.xxx
Water and Utility Rates: California’s water and utility rates cost an average of $15.44 per Kilowatt Hour, exceeded only by Hawaii and Connecticut and 39.6% higher than the national average.xxxi Our commercial rates are 58.3% higher.
Wireless taxes and fees: 10.95%xxxii
California Redemption Value (CRV) bottle and can fees: Imposed on most glass, plastic and aluminum bottles and cans, it is 5 cents for every container less than 24 ounces and 10 cents for every container larger than 24 ounces. Sales tax also applies to the fee.
Tire fees: $1.75 per-tire recycling fee. $.75 of the fee was due to expire in 2016 but this year the sunset was extended until 2024.
Motor Oil Fees: Manufacturers are charged $.26 per gallon on motor oil products, which are passed on to the consumer to support recycling programs. The fee is to be reduced to $.24 per gallon effective January 1, 2014.xxxiii
Electronic Device Recycling Fees: Between $3 and $5 depending on the size of the device.xxxiv
New Taxes and Fees In the Works
Below I have provided a short list of some of the bills moving through the Legislature that would impose or increase taxes or fees - or make it easier to do so.
Senate Bill 391 (DeSaulnier) will impose a $75 fee on each loan document, with some exceptions. The bill has passed the Senate and is awaiting action in the Assembly. Since the funds collected do not cover the cost of a specific service but will be used to pay for public housing programs, this “fee” is actually a tax. SB 391 represented a 750% tax increase on the recording of documents at County Recorder’s offices throughout the state.
Assembly Bill 2204 (Achadjian) would allow counties to double the amount of local vehicle registration fees.
Senate Bill 1183 (DeSaulnier) would authorize the collection of a point of sale tax on new bicycles, (excluding bicycles with wheels of 20 inches or less in diameter) and the revenues directed to improvements and maintenance of existing and new trails.
Senate Bill 1156 (Steinberg) will increase gasoline taxes by 15 cents per gallon next year and up to 43 cents a gallon by 2030. This is being presented as a replacement for cap-and-trade fees on oil companies that will almost certainly raise the cost of fuel.
You can always access bill text, the bill status and analyses from my Senate homepage at nielsen.cssrc.us or contact my office if my staff can provide you with additional information or assistance.
ihttps://taxfoundation.org/monday-map-top-state-income-tax-rates-2013; accessed Internet, November 14, 2013
iihttps://files.taxfoundation.org/legacy/docs/marriage_penalty_large.png; accessed Internet, November 14, 2013
iiihttps://taxfoundation.org/monday-map-combined-state-and-local-sales-tax-..., accessed Internet March 18, 2014
ivhttps://www.bankrate.com/auto/table-car-ownership-costs-by-state/; accessed Internet November 7, 2013.
v http://www.api.org/oil-and-natural-gas-overview/industry-economics/fuel-... accessed Internet November 7, 2013
vihttp://www.boe.ca.gov/industry/lumber_products.html#page=Overview; accessed Internet, November 14, 2013
viihttps://taxfoundation.org/weekly-map-state-wine-excise-tax-rates-2013, accessed Internet, November 7, 2013
viiihttps://taxfoundation.org/weekly-map-state-spirits-excise-tax-rates, accessed Internet, November 7, 2013
ixhttp://www.boe.ca.gov/sptaxprog/tax_rates_stfd.htm#6; accessed Internet, November 7, 2013
xhttps://taxfoundation.org/monday-map-state-cigarette-tax-rates-2013; accessed Internet, November 14, 2013
xihttps://taxfoundation.org/annual-state-local-tax-burden-ranking-2010-new... accessed Internet, November 7, 2013
xiihttps://taxfoundation.org/publications/state-business-tax-climate-index/, accessed Internet November 7, 2013
xiiihttp://blogs.sacbee.com/capitolalertlatest/2013/08/workers-compensation-... accessed Internet November 7, 2013
xivhttps://www.bloomberg.com/news/articles/2013-07-03/why-are-californias-b..., accessed Internet November 7, 2013
xv http://charlescarrollsociety.com/2012/09/24/california-looses-3-4-millio..., accessed Internet November 13, 2013
xvi https://taxfoundation.org/monday-map-migration-personal-income; access Internet, November 14, 2013
xviihttps://taxfoundation.org/map-2014-state-business-tax-climate-index; accessed Internet, November 14, 2013
xviiihttps://chiefexecutive.net/california-is-the-worst-state-for-business-20... accessed Internet, November 14, 2013
xixhttps://www.bls.gov/web/laus/laumstrk.htm; accessed Internet November 7, 2013
xxhttp://blogs.sacbee.com/capitolalertlatest/2013/11/california-has-nation... accessed Internet, November 19, 2013
xxi http://www.nea.org/assets/img/content/NEA_Rankings_And_Estimates-2013_(2).pdf, Chart H-11, accessed Internet, November 14, 2013
xxii https://www.ocregister.com/2012/10/08/editorial-fewer-but-very-well-paid... accessed Internet, November 14, 2013
xxiiihttps://www.bloomberg.com/news/articles/2012-12-11/-822-000-worker-shows... accessed Internet, November 14, 2013
xxivhttp://nawrs.org/wp-content/uploads/2013/08/Lee-8-14-2013.pdf; accessed Internet, November 14, 2013
xxv http://www.utsandiego.com/news/2012/jul/28/welfare-capital-of-the-us/; accessed Internet, November 14, 2013
xxvihttp://www.statebudgetsolutions.org/publications/detail/state-budget-sol... accessed Internet, November 14, 2013
xxviihttps://taxfoundation.org/monday-map-state-debt-capita, accessed Internet, November 14, 2013
xxviiihttps://www.topretirements.com/blog/great-towns/our-worst-states-to-reti... accessed Internet, November 7, 2013
xxix http://www.newgeography.com/content/003882-california-homes-require-real... accessed Internet, November 14, 2013
xxxhttp://junkscience.com/2011/10/wsj-californias-new-green-tax/; accessed Internet, November 14, 2013
xxxihttps://www.eia.gov/electricity/monthly/epm_table_grapher.cfm?t=epmt_5_06_a, accessed Internet November 7, 2013
xxxiihttps://taxfoundation.org/monday-map-state-local-taxes-fees-wireless-ser... accessed Internet November 7, 2013
xxxiii https://www.calrecycle.ca.gov/UsedOil/PolicyLaw/SB546; accessed Internet, November 21, 2013
xxxiv http://www.boe.ca.gov/news/pdf/l327.pdf; accessed Internet, November 14, 2013