By Richard Rider / December 29, 2014 / California Policy Center
December 2014 Update: Here’s a documented comparison of California taxes and economic climate with the rest of the states. The news is bad, and getting worse. But it doesn’t have to be this way! The state and local government policies that created an unaffordable California can be reversed.
PERSONAL INCOME TAX: Prior to Prop 30 passing in Nov. 2012, CA already had the 3rd worst state income tax rate in the nation. Our 9.3% tax bracket started at $48,942 for people filing as individuals. 10.3% started at $1 million. Now our “millionaires’ tax” rate is 13.3% – including capital gains (CA total CG rate now the 2nd highest in the world!). 10+% taxes now start at $250K. CA now has by far the nation’s highest state income tax rate. We are 21% higher than 2nd place Hawaii, 34% higher than Oregon, 48% higher than the next 2 states, and a heck of a lot higher than all the rest – including 7 states with zero state income tax – and 2 more that tax only dividends and interest income.
CA is so bad, we also have the 2nd highest state income tax bracket. AND the 3rd. AND the 5th and 7th.
http://taxfoundation.org/sites/taxfoundation.org/files/docs/ff2013.pdf, Ref. Table #12
SALES TAX: CA has the highest state sales tax rate in the nation. 7.5% (does not include local sales taxes).
GAS TAX: CA has the nation’s 2nd highest gas tax at 66.9 cents/gallon (Oct., 2014). National average is 49.3 cents. Yet CA has the 6th worst highways.
(CA has nation’s 4th highest diesel tax – 73.5 cents/gallon)
PROPERTY TAX: California in 2014 ranked 17th highest in per capita property taxes (including commercial) – the only major tax where we are not in the worst ten states. But the median CA property tax per owner-occupied home was the 10th highest in the nation in 2009 (latest year available).
http://taxfoundation.org/sites/taxfoundation.org/files/docs/TaxFoundation_2015_SBTCI.pdf, Ref. page 73.
“IMPACT FEES” ON HOME SALES: Average 2012 CA impact fee for single-family residence was $31,100, 90% higher than next worst state. 265% higher than jurisdictions that levy such fees (many governments east of the Sierras do not). For apartments, fee averaged $18,800, 290% above average outside state. The fee is part of the purchase price, so buyer pays an annual property tax on the fee!
“CAP AND TRADE” TAX: CA has now instituted the highest “cap and trade” tax in the nation – indeed, the ONLY such U.S. tax. One study estimates the annual cost at $3,857 per household by 2020. Even proponents concede that it will have zero impact on global warming.
SMALL BUSINESS TAX: California has a nasty anti-small business $800 minimum corporate income tax, even if no profit is earned, and even for many nonprofits. Next highest state is Rhode Island at $500 (only for “C” corporations). 3rd is Delaware at $175. Most states are at zero.
California small businesses failed in 2011 at a rate 69% higher than the national average — the worst state in the nation.
http://money.cnn.com/2011/05/19/smallbusiness/small_business_state_failure_rates/index.htm (based on Dunn & Bradstreet study)
CORPORATE INCOME TAX: CA corporate income tax rate (8.84%) is the highest west of the Mississippi (our economic competitors) except for Alaska.
Ref. Table #1 – we are 5th highest in nation in per capita corporate tax collections
BUSINESS TAX CLIMATE: California’s 2015 “business tax climate” ranks 3rd worst in the nation – behind New York and anchor-clanker New Jersey. In addition, CA has a lock on the worst rank in the Small Business Tax Index – a whopping 8.3% worse than 2nd worst state.
http://taxfoundation.org/article/2015-state-business-tax-climate-index and http://www.sbecouncil.org/wp-content/uploads/2014/04/BTI2014Final.pdf
LEGAL ENVIRONMENT: The American Tort Reform Foundation ranks CA the “2nd worst judicial hellhole” in U.S. – most anti-business – which is “better” than the last 2 years #1 ranking. The U.S. Chamber of Commerce ranks CA higher – “only” the 4th worst state (unfortunately, sliding from 7th worst in 2008).
FINES AND FEES: CA driving tickets are incredibly high. Red-light camera ticket $490. Next highest state is $250. Most are around $100.
CA needlessly licenses more occupations than any state – 177. Second worst state is Connecticut at 155. The average state is 92. But CA is “only” the 2nd worst licensing state for low income occupations.
CA has the highest/worst state workers’ compensation rates in 2013, up from 3rd in 2012. CA rates 21.3% higher than 2nd highest state, 88% higher than median state. Yet we pay low benefits — much goes to lawyers.
OVERALL TAXES: Tax Foundation study ranks CA as the 4th worst taxed state. But if counting ONLY in-state and local taxes, we are arguably the 2nd highest.
UNEMPLOYMENT: CA is tied for the 2nd worst state unemployment rate (November, 2014) – 7.2%. National unemployment rate 5.8%. National unemployment rate not including CA is 5.6%, making the CA unemployment rate 28.4% higher than the average of the other 49 states. We were at 4.8% in Nov, 2006 – vs. national 4.6%.
Using the 3rd quarter 2014 U-6 measure of unemployment (includes involuntary part-time workers), CA is just behind Nevada at 15.8% vs. national 12.5%. National U-6 not including CA is 12.1%, making CA’s U-6 31.1% higher than the average of the other 49 states. http://www.bls.gov/lau/stalt.htm
EDUCATION: CA public school teachers the 4th highest paid in the nation. CA students rank 48th in math achievement, 49th in reading.
http://www.lao.ca.gov/reports/2011/calfacts/calfacts_010511.aspx (page 36)
California, a destitute state, still gives away community college education at fire sale prices. Our CC tuition and fees are the lowest in the nation. How low? Nationwide, the average community college tuition and fees are more than double our California CC’s.
This ridiculously low tuition devalues education to students – often resulting in a 25+% drop rate for class completion. In addition, because of grants and tax credits, up to 2/3 of California CC students pay no net tuition at all!
Complaints about increased UC student fees too often ignore key point – all poor and many middle class CA students don’t pay the “fees” (our state’s euphemism for tuition). There are no fees for most California families with under $80K income. 55% of all undergraduate CA UC students pay zero tuition, and another 14% pay only partial tuition.
WELFARE AND POVERTY: 1 in 5 in Los Angeles County receiving public aid.
California’s real poverty rate (the new census bureau standard adjusted for COL) is easily the worst in the nation at 23.4%. We are 57.3% higher than the average for the other 49 states (up from 48.8% higher last year). Indeed, the CA poverty rate is 17.0% higher than 2nd place Nevada.
http://www.census.gov/content/dam/Census/library/publications/2014/demo/p60-251.pdf (page 9)
California has 12% of the nation’s population, but 33% of the country’s TANF (“Temporary” Assistance for Needy Families) welfare recipients – more than the next 7 states combined. Unlike other states, this “temporary” assistance becomes much more permanent in CA. http://www.utsandiego.com/news/2012/jul/28/welfare-capital-of-the-us/?print&page=all
California ranks 48th worst for credit card debt and 49th worst for percentage of home ownership.
GOVERNMENT INSOLVENCY: California now has the 2nd lowest bond rating of any state – Basket case Illinois recently beat us out for the lowest spot. We didn’t improve our rating – Illinois just got worse.
Average California firefighter paid 60% more than paid firefighters in other 49 states. CA cops paid 56% more. CA 2011 median household income (including gov’t workers) is 13.4% above nat’l avg.
HOUSING COSTS: Of 100 U.S. real estate markets, CA contains by far the least affordable middle class housing market (San Francisco). PLUS the 2nd, 3rd, 5th, 6th and 7th. San Diego is #5 (w/“middle class” homes avg. 1,056 sq. ft.)
TRANSPORTATION COSTS: CA has 2nd highest annual cost for owning a car – $3,966. $765 higher than the national average. http://tinyurl.com/lmxnucs
WATER & ELECTRICITY COSTS: California residential electricity costs an average of 35.4% more per kWh than the national average. CA commercial rates are 60.3% higher. For industrial use, CA electricity is 85.4% higher than the national average (July, 2014). NOTE: SDG&E is even higher. http://www.eia.gov/electricity/monthly/epm_table_grapher.cfm?t=epmt_5_06_a
BUSINESS FLIGHT: In 2012, our supply of California businesses shrunk 5.2%. In ONE year. NOTE: That’s a NET figure – 5.2% fewer businesses in CA in 2012 than were here in 2011. Indeed, in 2012, CA lost businesses at a 67.7% higher rate than the 2nd worst state! http://riderrants.blogspot.com/2013/07/in-2012-ca-lost-businesses-at-677.html
The top U.S. CEO’s surveyed rank California “the worst state in which to do business” for the 10th straight year (May, 2014).
From 2007 through 2010, 10,763 manufacturing facilities were built or expanded across the country — but only 176 of those were in CA. So with roughly 12% of the nation’s population, CA got 1.6% of the built or expanded manufacturing facilities. Stated differently, adjusted for population, the other 49 states averaged 8.4 times more manufacturing growth than did California.
http://www.cmta.net/20110303mfgFacilities07to10.pdf – prepared by California Manufacturers and Technology Association
OUT-MIGRATION: California is now ranked as the worst state to retire in. Easily the lowest percentage of people over age 65. We “beat” ’em all – NY, NJ, etc.
The median Texas household income is 18.1% less than CA. But adjusted for COL, CA median household income is 16.1% less than TX.
Consider California’s net domestic migration (migration between states). From 2003 through 2012, California lost a NET 1.43 million people. Net departures slowed in 2008 only because people couldn’t sell their homes. But more people still leave each year — in 2011 and again in 2012, we lost about 100,000 net people to domestic out-migration. In 2013, 49,000. Again, note that these are NET losses.
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Richard Rider is the chairman of San Diego Tax Fighters, a grassroots pro-taxpayer group. Rider successfully sued the county of San Diego (Rider vs. County of San Diego) to force a rollback of an illegal 1/2-cent jails sales tax, a precedent that saved California taxpayers over 14 billion dollars, including $3.5 billion for San Diego taxpayers. He has written ballot arguments against dozens of county and state tax increase initiatives and in 2009 was named the Howard Jarvis Taxpayers Association’s “California Tax Fighter of the Year.” Rider updates this compilation of statistics on California every month; they are updated here quarterly.