California Tax & Spending Categories
California's state tax revenue is primarily from (2005-06, source: Calif. Legislative Analyst's Office):
1. Personal income tax - $51 billion
2. Sales and use tax - $32 billion (general fund and special funds)
3. Corporate tax - $10 billion
4. Motor vehicle taxes - $8.5 billion
5. Other - $7 billion
1. Personal Income taxes, ranging from 1% to 9.3%, with the higher rates only applying to the portion of income over the threshold. Those making over $1 million pay an additional 1%. Thus, 9.3% is owed for amounts over $87,000 (up to $1 million), but a married couple earning $100,000 pays an effective rate of 4.9%. Capital gains are considered part of personal income. Since most people paying capital gains are in the higher tax brackets, they are usually taxed at 9.3%, and thus contribute a large amount to state revenue, and cause large variations in that revenue with swings in the economy. This is above average compared to other states, with 5 states higher.
2. Sales tax. The state rate is 6.5 % (.25% to pay off deficit financing bonds). Local rates vary, with the total ranging from 7.25- 8.75 %. This is about average compared to other states.
3. Corporate tax (corporate franchise tax, corporate income tax, and bank tax). There are number of variations, but the rate is generally 8.84 % (Banks pay 10.84 % since they are exempt from certain local levies). The rate is high compared to other states, only 3 states are higher.
4. Motor vehicle taxes. These are mostly vehicle license fees (0.65 percent of a vehicle’s estimated market value) and gas taxes (18 cents per gallon). The license fees used to be around 2 % before Proposition 1A in 2004.
Who pays taxes in California? A California Budget Project paper notes, among other things, that (1) California is a "moderate" tax state - 13th highest (high income tax, low property, gas and alcohol taxes), (2) the poorest in California pay the highest percentage of their income in taxes (lowest 20% pay 11.1%, highest 20% pay 8%), and (3) over the last few decades the tax burden has shifted from corporations to individuals personal income tax.
The total revenue of property taxes was $32 billion in 2003-04, with over 50% going to schools.
California budget expenditures (2007-08, source - Calif. Legislative Analyst's Office):
1. Education - $50 billion
2. Health (mostly Medi-Cal) - $20 billion
3. Criminal Justice - $13 billion
4. Social Services - $9 billion
5. Transportation - $ 1.5 billion
6. All other - $ 7 billion
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