Happening in California 31.20
Welcome to Happening in California, a brief look at political news, insights, and analysis of the world’s fifth-largest economy.
It’s almost Tax Day, and in California that means paying the highest state income tax in the nation.
And if, as seems likely, two tax-increase initiatives qualify for the November ballot, California’s income tax could skyrocket — putting it 44% higher than Hawaii, which has the second highest income tax.
Already the tax burden in California is so large that it’s become a significant factor in the high cost of living here in the Golden State. Let’s take a closer look …
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The Big Picture: California has some of the highest taxes in the nation: highest state sales tax, highest gas tax, eighth highest corporate tax, and the highest income tax.
The highest sales tax in the nation is split between the state and local governments in California. While the state gets 6% and counties get a minimum of 1.25%, most jurisdictions have a higher rate. For instance, in Los Angeles, the total sales tax rate is 9.5% while in many Bay Area cities the rate is as high as 10.75%.
The highest gas tax in the nation stands at 51.5 cents per gallon in California — it has increased 17% since 2014. However, when you add in California's additional fees and regulations plus the federal gas tax, Californians pay a whopping $1.27 in taxes and fees per gallon.
The 8th highest corporate tax in the nation is Califorina’s flat tax of 8.84%.
The highest state income tax in the nation is 13.3% and it’s here in California, but it could increase to 15.8% if a Facebook co-founder and Lyft are successful in passing two ballot measures.
$334 billion in new and higher taxes have been proposed since last year. It’s no wonder why so many working families in California are finding it harder and harder to make ends meet.
First, there is the ridesharing giant Lyft that is rent seeking via the ballot box — sponsoring an initiative that would provide rebates and other incentives for zero-emission vehicle purchases as well as charging stations for zero-emission vehicles (fits nicely into their business model and the state mandate that 90% of their vehicles are EV by 2030). The subsidies would be funded by a 1.75% income tax hike for earners over $2 million.
Then there is the Facebook co-founder who is attempting to establish a state institute for pandemic detection and prevention. The $15 billion tax increase would be funded with a 0.75% income tax hike for earners over $5 million.
California’s state budget is highly dependent on income tax revenue, especially among high earners. Should these ballot measures pass, California's income tax will increase by 19% — testing the upper bounds of how large of a tax bill high earners will tolerate before they leave the state.
In addition to high state taxes, Californians also pay some of the highest local taxes and fees. In total there are more than 80 different taxes and fees levied at the local level. In total, counties and cities generated more than $184 billion in taxes in 2018 from hard-working Californians — a 98% increase in just 15 years.
And during this June’s primary election, California voters will see another $133 million in proposed higher taxes on the ballot.
The Bottom Line: In California, 1978 was known as the year of Tax Revolt with the passage of Prop 13 which curbed out-of-control property tax increases. Now, with inflation surging and taxes rising, might Californians respond with another Tax Revolt? Stay tuned ...