Three myths about state taxes

Who’s really paying the most?

In order to resolve the current crisis surrounding the California budget, several tax myths need to be dispelled:

Myth No. 1: Corporations pay a higher percentage of their profits in taxes than in the past. Reality: According to the watchdog group California Budget Project, the amount corporations pay has fallen from 9.6 percent in 1981 to 5.2 percent in 2006.

Myth No. 2: Overall tax rates have gone up. Reality: Accumulated tax cuts enacted since 1993 resulted in a state revenue decrease of nearly $12 billion in 2008-09. In addition, behind-the-scenes legislative deals made in September 2008 and February 2009 gave sweetheart tax breaks to some of the state’s largest corporations. Those deals will cost the state at least another $2 billion annually beginning in 2009-10.

Myth No. 3: The wealthy pay a larger percentage of their income in taxes than others do. Reality: As this chart demonstrates, the lowest-income households pay the largest share of their income in state and local taxes:

2007 taxes as a percentage of 2004 household incomes

Source: California Budget Project