The wealthiest Californians paid nearly half of the state’s income taxes in 2014 after seeing an uptick in their average income from 2013, according to updated income distribution data compiled by the state Franchise Tax Board.
The Top 1 percent weren’t the only ones who saw their average incomes – and share of the tax burden – increase in 2014. For the first time in years, average adjusted gross incomes increased across all five taxpayer groupings analyzed by the tax agency.
Wealthier filers had the largest gains, though. And only the top two-fifths of filers had average incomes in 2014 that exceeded average incomes 20 years ago, after adjusting for inflation.
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The financial well-being of California’s wealthiest taxpayers is a major concern of state budget planners. California’s revenue stream relies heavily on income taxes, a volatile source that recently prompted words of warning from Moody’s credit rating service.
California’s wealthiest filers had 48 percent of the tax burden in 2014, the highest since 2012, when it was 50.6 percent. That year’s figure reflected the fact that many high-income filers had shifted income into 2012 to avoid a tax hit from the expiration of federal tax cuts first approved under then-President George W. Bush.
The next-highest Top 1 percent tax concentration was 48.1 percent in 2007, right before the state slid into a deep recession. The wealthiest Californians’ share of tax revenue dropped to 36.9 percent in 2009.
Meanwhile, average income for the top fifth of filers – with adjusted annual gross incomes of $94,342 and up – grew by 7.4 percent from 2013 to 2014. It increased by about 42 percent, from $183,000 to almost $261,000, during the past 20 years.
And after sagging during the recession, average income for the second-highest fifth of taxpayers in 2014 – $68,729 – was 3.5 percent higher than in 2013 and topped topped the $66,433 of 1995. That is an improvement over the previous 20-year span, when real income for filers in the second-highest fifth was less in 2013 than in 1994.
For the 9.4 million filers in the bottom three-fifths of filers, average adjusted real income remained below 1995 levels. Filers in the second-lowest fifth had an average adjusted gross income of $20,941, up just 0.4 percent from 2013.