Is California a ‘high-tax state’?
Not if you’re low income, institute’s report says
Whether it be that all Californians surf, live by the beach or only vote blue, there are a lot of assumptions about residents of the Golden State. Yet a new report is challenging one of the most widely held belief – that Californians shoulder the nation’s highest tax burdens.
Findings from an Institute on Taxation and Economic Policy report this month asserts that most Californians pay income tax rates that are either similar to, or slightly lower than, those in states widely associated with low taxes.
“California taxes are close to the national average for families in the bottom 80 percent of the income scale,” the report says. “For the bottom 40 percent of families, California taxes are lower than states like Florida and Texas.”
California’s reputation as a high-tax state has long been fodder for state and national politicians, resurfacing often in partisan debates over government spending and economics.
For families earning $145,900 or less,
California is not a high-tax state. But top-earners making more usually do indeed pay tax rates higher than anywhere else in the nation, the report says.
California applies at 12% tax rate to its top 1% of earners, categorized as those making more than $862,100 per year.
Yet 16 states including
Florida,
Tennessee and Texas tax their poorest residents – the bottom 20% of earners – at rates that are higher than California's tax on the rich, the report says, anywhere between 12.2 to 15.1%.
Though California's income tax rates for modest-earners do not top out lists, the state does have the highest gas taxes and suffers from a housing crisis. The center-right Tax Foundation
consistently ranks the state among the lowest in its business tax climate, consistent with common criticism.
Rankings from the Tax Foundation list New York as the state with the highest tax burden followed by Connecticut and Hawaii. On the other end of the list Alaska, Wyoming and Tennessee are considered to have the lowest tax burdens.
Kathryn Palmer is the California 2024 Elections Fellow for USA TODAY. Reach her at kapalmer@gannett.com and follow her on X @KathrynPlmr.