Three myths about state taxes

Who’s really paying the most?

This article was published on 06.18.09

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