CAL-TAX: TAXES ARE HEAVY BURDEN IN CALIFORNIA

The Golden State ranks substantially higher in aggregate tax burden than western states with which we compete for jobs and economic investments. Raising taxes is not the solution to the state’s budget deficit.

California’s Rank with Western Competing States (1999-2000 Data)
State	Tax Burden Per $1,000 Personal Income	Tax Burden Rank
California	$120.69	8
Texas	96.83	46
Nevada	105.27	40
Oregon	105.65	38
Washington	107.47	33
Arizona	110.88	24

Raising taxes in California, where the tax burden is already much heavier than most states, is a tried-and-failed response to a California spending crisis. What California needs is a huge dose of improved management of the $130 billion in state and local taxes Californians pay each year.

This extraordinary level of taxation in California can provide more than enough in tax revenue to fund police and fire services, education for our children, and public works projects and health and welfare services for Californian’s poor.

California’s tax burden compared to other states is so high that it is a factor in making California noncompetitive, making it harder to attract employers and jobs to crank up the state’s sputtering economic engine.

State Tax Burden For High Income States (1999-2000)
State	Tax Burden Per $1,000 Personal Income	Tax Burden Rank
New York	$141.04	1
Hawaii	125.92	6
California	120.69	8
Connecticut	119.69	11
Delaware	115.11	16
New Jersey	113.70	19
Massachusetts	110.88	23
Maryland	109.36	29
Illinois	107.76	32
Nevada	105.27	40
Colorado	103.10	42
Virginia	102.88	43
New Hampshire	88.00	50

According to the latest data (1999-2000) from the U.S. Department of Commerce’s Bureau of the Census, California is eighth highest among the states when tax burden is compared on the basis of personal income and seventh-highest per capita. It is critical to note that none of the western states with which California competes is even close to eighth. States with a higher burden than California are thousands of miles away.

In May, the Tax Foundation, a Washington, D.C.-based think tank that has been analyzing and reporting on tax issues for 65 years, released tax burden rankings for the current year that lists California sixth-highest among the states in state and local taxes per capita. California ranks eighth-highest as a percentage of income. Using data from federal and state sources, as well as the National Conference of State Legislatures, the Tax Foundation’s figures include state and local taxes scheduled to go up or down based on states’ statutes enacted through 2002. (See tables below.)

State and Local Tax Burden Per Capita, Calendar Year 2003
Rank	State	Tax Burden
1.	Connecticut	$4,858
2.	New York	$4,534
3.	Massachusetts	$4,105
4.	New Jersey	$3,993
5.	Minnesota	$3,888
6.	California	$3,670
7.	Rhode Island	$3,577
8.	Maryland	$3,572
9.	Maine	$3,519
10.	Washington	$3,345
Other Western States
14.	Colorado	$3,219
28.	Nevada	$2,742
30.	Utah	$2,699
31.	Oregon	$2,682
32.	Arizona	$2,677
38.	Texas	$2,492
41.	New Mexico	$2,428
	USA	$3,150
Source: Tax Foundation

California’s tax burden is 24 percent above the national average, according to a Milken Institute study released last year by the California Manufacturers and Technology Association. California’s corporate income tax burden is nearly 40 percent above the national average, with only Massachusetts and New Jersey higher, according to the Milken report.

And these figures do not consider billions of dollars in local fees that have been imposed as surrogates for reduced property tax revenue (although property tax revenues have enjoyed healthy annual growth due to new construction and change-of-ownership reappraisals).

The figures also do not tell the whole story. Consider a recent report from the Tax Foundation showing that California ranks 49^th among the 50 states using a State Business Tax Climate Index. Not only does this consider amounts of taxes collected, but it gauges what the foundation sees as economic damage caused by the ways each state extracts tax revenue. Only Mississippi ranked worse than California.

Common threads of the lowest performing states are complex tax codes imposing above-average rates on levels of income, above-average sales tax rates exempting few business input items; high overall state tax burdens and revenues that have grown faster than personal income. Another factor common to the worst states is a tax code that imposes considerable compliance costs on business. Here is a link to The State Business Tax Climate Index, which was issued on May 22: http://www.taxfoundation.org/businesstaxclimate.html.

State and Local Tax Burden as Percent of Personal Income, Calendar Year 2003
Rank	State	Tax Burden
1.	Maine	12.2%
2.	New York	12.0%
3.	Minnesota	11.0%
4.	Rhode Island	11.0%
5.	Connecticut	10.9%
6.	Hawaii	10.7%
7.	Wisconsin	10.7%
8.	California	10.6%
9.	Utah	10.6%
10.