Here’s how long Californians have to work to pay off taxes – and how other states compare
California’s tax burden is higher than most states — but a lot of states have it worse.
That’s the finding of a report from the nonpartisan Tax Foundation. It assigns each state a “Tax Freedom Day,” the day when residents of a state have collectively earned enough money to pay their total tax bill for the year.
Californians in theory had to work until April 20 last year to pay those bills, four days longer than the national average. The state is in a 38th place tie for highest tax burden, along with Maine and Washington.
New York has the biggest tax bills. Its residents worked until May 3 to pay their taxes. Alaska is the least taxed state; its residents were done by March 25.
Of the 110 days Californians worked last year to pay taxes, 72 are for federal tax collections, including income, Social Security and Medicare taxes, while 38 are for state and local taxes.
Americans as a whole worked 68 days to pay federal taxes and 37 to pay state and local taxes.
The Tax Freedom Day estimate measures all taxes paid in 2019, including individual income taxes that people are now filing on their tax returns with the Internal Revenue Service before the April 15 deadline.
“People in higher tax states tend to have later Tax Freedom Days, meaning they have to work longer before they collectively earn enough money to cover their federal, state, and local taxes,” explained Janelle Cammenga, Tax Foundation policy analyst.
Income tax burdens are higher where average incomes are higher, like in California, said Erica York, economist at the Tax Foundation. In 2018, the latest data available, California ranked fifth in per capita income at $63,557, trailing Connecticut, Massachusetts, New York and New Jersey.
And since federal tax rates, and many state tax rates, are progressive, the more one earns, the higher the marginal tax rate. In 2019 – taxes that are due April 15 – those married and filing jointly earning $19,401 to $78,950 pay at a 12% rate. That jumps to 22% for those making $78,951 to $168,400. Eventually the rate becomes 37% for those earning $612,350 or more
State taxes tended to be higher in California, too. Its state sales and gasoline taxes were the highest in the nation, and its individual income tax collections per capita ranked third – at $2,405 – in fiscal 2018, behind only Connecticut and New York.
California also placed third in state corporate income tax collections per capita at $316, behind New Hampshire and Massachusetts.
But it’s those northeastern states that keep California from reaching the top of the tax burden list. Not only do incomes tend to be higher in the Northeast and New England, but they’ve been hit hard by changes in the 2017 tax law that limited state and local income tax deductions.
Nationally, the average Tax Freedom Day was April 16, 2019, the same as in 2018. That’s earlier than past years – in 2015, it was April 24 and has gone down steadily ever since.
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