In Fiscal Year (FY) 2013, California collected $201.5 billion in state and local taxes. While this is an impressive sum of money, it tells us little about whether or not the average California taxpayer can afford this level of taxation.
As shown in Chart 1 below, California’s state and local tax burden (tax collections divided by personal income) was the fourteenth highest in the nation for FY 2013 at 11 percent—this is 7 percent above the national average of 10.3 percent. As shown in Chart 2, the tax burden has grown over time by 21 percent to 11 percent in FY 2013 from 9.1 percent in FY 1950.
California’s high tax burden is driven by a high individual income tax burden (3.3 percent, 8th highest) and a high corporate income tax burden (0.41 percent, 15th highest). Of course, California’s high tax burden for these two taxes is driven by high marginal statutory tax rates with the 2014 top individual income tax rate at 13.3 percent (highest in the country) and the top corporate income tax rate at 8.84 percent (11th highest).
Mitigating the high property tax burden has been a declining property tax burden which has fallen by -30.1 percent to 3.3 percent in FY 2011 from 4.7 percent in FY 1950. This drop was driven by the enactment of Proposition 13 passed in 1978. The impact was immediate with a drop in property tax burdens of 52 percent to 2.6 percent in FY 1979 from 5.4 percent in FY 1978.
Proposition 13 implemented (pdf) the following:
Some question whether Proposition 13 succeeded in its goal of limiting the growth in tax burdens over time. The Tax Foundation claims that Proposition 13 it just drove up other taxes such as the income and sales tax. Yet, tax burdens are still below what they were in FY 1978—11 percent in FY 2013 versus 13.2 percent in FY 1978. So it appears that California’s tax burden would have been much worse today if not for Proposition 13.
Of course, the tax burdens for local government can vary just as much as they do among the 50 states. As such, we have also calculated the local government tax burden for every county in California—this includes every taxing jurisdiction within the geographic county borders whether it is a city, a special district, or county government itself.
The California counties with the highest local government tax burden include: Alpine County, CA (12.6 percent), Mono County, CA (12.5 percent), and Inyo County, CA (6.4 percent). The California counties with the lowest local government tax burden include: Lassen County, CA (2.3 percent), Merced County, CA (2.7 percent), and Kings County, CA (2.7 percent).
J. Scott Moody has nearly 20 years experience as a public policy economist with a specialty in tax policy and has over 180 publications. He has worked for numerous national and state-based think tanks such as the American Conservative Union Foundation, Federalism In Action, Tax Foundation, Heritage Foundation, and The Maine Heritage Policy Center.