Taxes, California style

Sacramento’s ‘misery’ reputation partially due to high state income taxes

For the tax man (or woman), California is certainly the Golden State. Unmarried filers in California pay some of the highest taxes nationally, particularly for those considered middle income. As David Cay Johnston notes, these taxes are in addition to federal, payroll, utility, gas and sales taxes. Such high state taxes are one of the reasons Forbes magazine controversially ranked Sacramento and seven other California cities among the most miserable cities in the country this year.

“California is certainly at the high end,” said Mark Robyn, an economist with the nonpartisan advocacy group the Tax Foundation. “But keep in mind there are different definitions in different states about what can be deducted, so that can lower what they actually end up paying.”

Even so, those in California—one of 43 states that levies taxes for individuals—are hit particularly hard comparatively. Like most states (some states such as Colorado have all single taxpayers pay a fixed percent), California has different brackets for different income levels. Starting with zero, there are seven levels in all, with the biggest jump at the high end. At that level, state individuals with incomes of about $50,000 pay the same percent in state taxes than those at the top. Those making $1 million or more pay a 10.3 percent marginal rate, while those making $46,766 or more pay 9.3 percent.

A few other states also tax 9 percent or more of an individual’s income, but that income level also varies. Hawaii, for instance, taxes 9 percent for those earning $150,000, while those making $48,000 pay 8.2 percent. And California isn’t Oregon, which taxes 9 percent or more for any income between $7,000 and $125,000.

At the same time, Johnston writes, “When it comes to state local taxes, the poor bear a heavier burden than the rich in every state except Vermont.” And no matter where you live, these levels can also foreshadow an individual’s future economic prospects. Foreign Policy magazine reported this month that half of American children of parents in the bottom 10 percent income bracket stay in the bottom 20 percent as adults.

In California, those at the lower end do have some relief, however.

“California’s tax threshold for state income taxes—that is, the point below which residents are not subject to the state income tax system—is pretty high relative to other states,” Dennis Ventry, a professor of law at UC Davis, said, pointing to states where those living below the poverty line are still subject to state taxation. In California, however, the tax threshold for a two-parent family of four is roughly $31,000, compared to the poverty line of $22,000.

“[For those families] this is a good thing, unless you think a family of four earning $31,000 living in a high cost-of-living state, barely able to put food on the table, and already subject to federal income taxes, Social Security taxes, one of the country’s highest retail sales taxes, tolls, fees and other taxlike charges should pay more in taxes,” Ventry added.

So what do Californians get in return for paying these state taxes?

“That depends,” Robyn told SN&R. “You have to take a look at things like infrastructure, the roads, bridges and things like schools, and see what type of shape they are in.”