California has the Fourteenth Highest Tax Burden in the Nation for 2013

Apr 03, 2015

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 State and Local Tax Burden Rank 2013.jpg

California’s high tax burden is driven by a high individual income tax burden (3.3 percent, 8^th highest) and a high corporate income tax burden (0.41 percent, 15^th 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 (11^th 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:

Capped the property tax rate at 1 percent of the value of property at time of purchase.

Capped the increase in property assessments to the rate of inflation or 2 percent—whichever is lower.

Rolled back assessment values to 1976 levels.

Required state and some local tax increases to be approved by a two-thirds majority.

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.

#California #taxburden has grown 11% between FY 1950 to 2013 to 11% from 9.1%. (click to tweet)

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).

Click here to view tax burden data by state, county, type of tax, and for years 1950 to 2013.

California State and Local Tax Burden 1950 to 2013.jpg

J. Scott Moody

Scott has nearly 20 years of experience as a public policy economist. He is the author, co-author and editor of over 180 studies and books. His professional experience also includes positions at the American Conservative Union Foundation, Granite Institute, Federalism In Action, Maine Heritage Policy Center, Tax Foundation, and Heritage Foundation.