California has one of highest tax burdens in the nation, new study says
California’s tax climate ranks near the bottom among all 50 states, according to a new State Tax Competitive Tax Index by the Tax Foundation.
California ranks 48th, ahead of only New Jersey and New York, the foundation said.
Wyoming and South Dakota rank first and second.
“The states in the bottom 10 tend to have a number of issues in common,” the foundation’s analysis said, notably what it called complex, relatively high tax rates.
The index is based on different rankings of taxes – income, corporate, sales, property and unemployment. The center-right foundation compiles the index, which measures the tax climate for businesses and consumers.
The findings are similar to a study earlier this year by WalletHub, a financial services firm. It found Californians had the nation’s fourth-highest tax burden, largely because of its income tax rates for higher-wage earners..
Are California taxes really that high?
California officials have argued for years that conclusions about high taxation in California are misguided. Gov. Gavin Newsom’s office did not return a request for comment by deadline.
California has the highest state income tax rate in the nation for the wealthy – 13.3% for incomes of $1 million and above.
But the state also has very progressive tax brackets, and studies have found that people with lower and middle class incomes tend to pay at rates competitive with many other states.
The progressive Institute on Taxation & Economic Policy found last year that California families in the bottom 80% of the income scale — those having annual incomes of $145,900 or less — have overall tax rates near the national average.
“For families of modest means, California is not a high tax state,” said a study last year by the institute.
The Tax Foundation study found that overall, California’s income tax ranks 49th highest, behind only New York.
California’s top income tax rate of 13.3% on incomes of more than $1 million is followed by Hawaii at 11%, New York at 10.9% and New Jersey at 10.75%
The study did explain that California has a highly progressive tax system. The top rate, it said, is far from the 4% rate a median income household would pay.
Among states with a state income tax, Arizona and North Dakota are the lowest at 2.5%.
High taxes and the perception of high taxes hurt California’s ranking, the analysis said.
“States where the tax base is found to cause an unnecessary drag on economic activity include New Jersey, New York, California, Connecticut, Maryland, Pennsylvania, Alabama, Delaware, Mississippi, and Virginia,” it found.
Other California taxes included in the study were its sales tax, which placed 46th and its corporate tax, 41st. Property taxes ranked 27th and unemployment taxes were 26th.
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