Measured as a share of family income, California¹s poorest families pay the
most in taxes. The poorest fifth of the state¹s non-elderly families, with
an average income of $11,100, spent 11.3 percent of their income on state
taxes in 2002. In comparison, the wealthiest 1 percent, with an average
income of $1.6 million, spent 7.2 percent of their income on state
The total tax burden on California¹s families is a function of the state¹s highly progressive personal income tax and regressive sales and excise taxes. Higher income households pay more in income taxes. Lower income households pay more in property taxes. Households also bear a share of the burden of taxes imposed on business through higher prices and reduced corporate earnings. Higher income households pay a relatively greater share of the corporate income tax, while lower income households pay a greater share of businesses¹ sales and excise tax burden.
A single mother with one child will have no 2005 state income tax liability unless she earns over $36,658. A family of four with two children will have no 2005 income tax liability unless their income exceeds $45,658. California¹s high income tax threshold is attributable to the increases in the dependent credit enacted in 1997 and 1998. The state¹s high tax threshold also means that low- to moderate-income families receive minimal or no benefits from the state¹s various credits, deductions, and other tax benefits, since they have little or no tax liability to offset.
WHO PAYS TAXES IN CALIFORNIA?
? How Much Do Californians Pay in State and Local Taxes?
Lowest-Income Households Pay the Largest Share of Their Income in State and Local Taxes
Lowest 20% (under $18,000) 11.3%
Second 20% ($18,000 – $30,000) 10.1%
Middle 20% ($30,000 – $47,000) 9.2%
Fourth 20% ($47,000 – $80,000) 8.7%
Next 15% ($80,000 – $168,000) 8.1%
Next 4 % ($168,000 – $567,000) 7.6%
Top 1% (over $567,000) 7.2%
Note: Calculated for non-elderly, married couples. Includes offset for federal deductibility of state taxes.
Source: Institute on Taxation and Economic Policy
California¹s 2004 median household income, the income where half of all households
earned more and half earned less, was $49,894.3 The median income for all California
personal income taxpayers was $32,242 in 2003, the most recent year for which data
are available. The 2003 median income of married taxpayers filing joint returns was
$58,653.
Small businesses pay a very small share of the corporate income tax. While 589,310
corporations filed tax returns in 2003, the 1.7 percent with taxable incomes of $1 million
or more paid 82.2 percent of the tax. The most costly corporate tax credit is the
Research and Development (R) Credit. In 2003, 1,349 corporations claimed $552.2
million in R credits, averaging $409,327 per firm. Overall, relatively few corporations
claim the various state tax credits. In 2003, fewer than 3 percent of the state¹s
corporations claimed any of the state¹s tax credits.
California is a moderate tax state. In 2004-05, California ranked 12th among the
50 states with respect to state taxes as a percentage of personal income. The state
ranked 18th with respect to total ³own source² revenues.
This new Policy Points is available at www.cbp.org <http://www.cbp.org> .
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From the California Budget Project
1107 9th Street, Suite 310
Sacramento, CA 95814
Jean Ross, Executive Director
ph: (916)444-0500 fax: (916)444-0172
Email: cbp@cbp.org
1995 – 2005: Celebrating ten years of independent budget and policy analysis .