CALIFORNIA TAX FACTS
In our ongoing pursuit to assist Orange County taxpayers understand and navigate the complexities of California's bloated tax system, OCTax highlights the following Tax Facts prepared by CalTax:
California levies a 7.25 percent general sales and use tax on consumers, which is the highest statewide rate in the nation. Local governments are permitted to levy additional sales and use taxes, and the combined rate of the additional local taxes should not exceed 2 percent. However, some local governments have been given special dispensation to go above this cap.
As of July 2019, California's combined state and federal gasoline taxes totals 79.18 cents per gallon, the highest in the nation.
Pennsylvania follows with 77.1 cents per gallon and Illinois trails with 73.38 cents per gallon.
California's personal income tax has the highest top rate and one of the most highly progressive structures in the nation. After passage of Proposition 30, California's top rate is 13.3 percent (including the 1 percent surcharge for mental health programs, for all personal income taxpayers with taxable income over $1 million). Hawaii is second, with a top rate of 11 percent.
Most small businesses are S Corporations, partnerships, or sole proprietorships, and pay their business taxes at the rates for individuals, which makes California's taxes on small businesses some of the most burdensome in the nation. Seven states do not impose a personal income tax.
"Corporations looking to relocate, or even establish, a business in the West may shy away from California, as the state's 8.84 percent flat rate is the highest corporate tax rate in the West," the Tax Foundation said in 2011.
Nothing has changed, as the group's 2014 State Business Tax Climate Index report shows that other Western states still have much lower corporate tax rates. Nationally, only nine states have a higher top corporate tax rate than California (Alaska, Connecticut, Illinois, Iowa, Maine, Minnesota, New Jersey, Pennsylvania and Rhode Island).
The Tax Foundation ranks the 50 states based on the effective tax rates on owner-occupied housing. California was ranked as the 22th highest nationally. Without Proposition 13, the 1978 voter-approved initiative that set limits on property taxes for California property owners, the state likely would rank much worse.
Many California property owners also are required to pay costly parcel taxes. These are annual property taxes (not based upon the value of the property) imposed by many school districts, special districts and other jurisdictions.