How Does California Compare to Other States?
Californians pay $3,337 per capita to support state and local government. This is up $200 from the prior year, and California's rank rose to 11th highest, from 14th. Per capita figures are not a good indicator of actual taxpayer burden, since they include children and other non-taxpayers. For that reason, Cal-Tax also includes a measure we call the "per worker" tax burden, which divides tax collections by the number of individuals in the labor force - anyone working or seeking employment in California. California's per worker tax burden also increased, rising to $6,838 - up more than $400 over the prior year - and increasing California's rank to the 8th highest tax burden from a previous level of 11th.

When measured by income, California's tax burden rose slightly, to $141.44 per $1,000 of personal income. In other words, the average Californian paid 14.14% of income in state and local taxes, fees and assessments. This ranks California 25th against all other states, which appears to be an average tax burden if not put into the proper context of comparison to other high-income states.

Tax Burden of High-Income States
As described in the March 1996 Cal-Tax Policy Brief, How (Not) to Measure Tax Burden, analysis of tax burden based on income implicitly skews rankings of the states, showing most high-income states ranking very low in tax burden and many low-income states ranking high.

States with a small economic base (many of which are also sparsely populated) must by necessity exert a greater tax effort (i.e., higher tax rates) simply to provide basic infrastructure and services such as schools, highways, prisons, health and welfare. High-income states, like California, are not forced to exert the same kind of tax effort to provide those services and facilities. Indeed, a smaller percentage of income can yield an even greater level of public services if the economic base is large.

Therefore, a simple ranking of all states' taxes and fees per $1,000 of personal income does not provide a useful comparison. States must be grouped with other states of similar income levels to more fairly compare their relative tax burdens. Table 1 shows this measure of tax burden for the highest-income states, including California. When shown in this context, California's tax and fee burden of $141 per $1,000 of personal income is relatively high. California ranks fourth among the top 13 income-producing states, behind New York, Hawaii, and Delaware. Note how many of the high-income states are ranked very low in the national comparison. For example, Massachusetts, which is often thought of as a high-tax state, ranks only 42nd against the 50 states with a tax and fee burden well below California's.
 

State and Local Tax and Fee Burden Highest Income States Table 1 State '94-95 Income Per Capita Income Rank Taxes & Fees Per $1,000 Personal Income National Tax Burden Rank 1. New York $27,318 4 $172.12 2 2. Hawaii 24,580 9 158.55 9 3. Delaware 25,354 6 143.37 21 4. California 23,594 14 141.44 25 5. Nevada 23,663 11 140.47 27 6. New Jersey 29,356 2 132.41 36 7. Connecticut 31,545 1 130.18 39 8. Colorado 23,613 13 130.02 40 9. Massachusetts 27,402 3 128.87 42 10. Maryland 25,947 5 126.98 43 11. Virginia 23,617 12 124.56 46 12 Illinois 24,875 8 124.54 47 13. New Hampshire 24,944 7 109.79 50 Alaska is not included since it exports much of its tax burden on non-residents (mostly oil companies).

Recent Trends
This report year, 1994-95, was the first fiscal year that saw revenues completely recover from the 1990s recession. Last year's report, using 1993-94 figures, showed collections from property taxes and corporate income taxes declining while personal income tax and sales tax revenues increased moderately. In contrast, 1994-95 brought healthy revenue growth, and (see Figure 3) major revenues grew by more than $4 billion, with corporate income taxes and fees and assessments each growing more than $1 billion. The property tax growth in Figure 3 is derived from State Board of Equalization data, because the Census Bureau's figures showed a far greater, but erroneous, number. Census Bureau staff have explained that the previous year's report had classified a portion of school districts' property tax revenues as intergovernmental revenues because the state had shifted some property tax from other local governments to the schools. This year, the Bureau has corrected the property tax figure, but it is not comparable to last year's reported property tax collections.

Tax Burden Tables:

• Per Capita
• Per Worker
• Per $1,000 Personal Income
• Federal Taxes
• Statistics
• Summary

Fees and Assessments are Major Revenue Sources
State and local fees and assessments continue to be a dominant component of tax burden. Together, these revenues are 23 percent of California's state and local tax burden, exceeding income, sales, or property tax collections. Figure 4 shows that fees, assessments, and other revenues have grown to replace almost all of the tax burden reductions that resulted from Proposition 13 in 1978.

Proposition 13 dramatically reduced property taxes and made it more difficult to raise other taxes by enacting vote requirements for many taxes and requiring a two-thirds vote of the Legislature to raise state taxes. Since the late 1970s, Californians' share of income paid in taxes has remained lower than before enactment of Proposition 13. However, because fees and other non-tax revenues are easier to increase, many government agencies have more aggressively used them to increase their revenues. Consequently, the overall revenue burden of Californians is very close to the level imposed before enactment of Proposition 13.

Federal Taxes
Federal taxes paid by Californians rose in 1994-95 to $163 billion, or about $5,172 per capita, $10,599 per worker, and 21.9 percent of personal income. Although Californians' federal tax burdens rose, those in many other states rose faster, decreasing California's rankings against the other states. Total tax burden, including federal, state and local impositions, equals about 36 percent of personal income, $17,437 per worker, or $8,510 per capita.

Sources
State and local revenues were obtained from the U.S. Department of Commerce, Bureau of the Census, via its Internet web site at: http://www.census.gov. Aggregate federal tax collection data comes courtesy of the Tax Foundation in Washington, D.C. The Tax Foundation uses an economic model to estimate collections from income earned in each state. Tax Foundation's Internet web site can be found at: http://www.taxfoundation.org.

Population as of July 1, 1995 was obtained from the Census Bureau, included in its reports on state and local finances. Labor force data used to calculate per worker figures were obtained from the U.S. Department of Labor, Bureau of Labor Statistics, at its Internet web site: http://stats.bls.gov. Monthly data were utilized to calculate a fiscal year average of labor force for each state. Fiscal year personal income figures were calculated using quarterly data published by the U.S. Department of Commerce, Bureau of Economic Analysis. BEA can be found on the Internet at: http://www.bea.doc.gov.

All calculations of tax and fee burden per capita, per worker, or per $1,000 of personal income were made by Cal-Tax. Please cite the California Taxpayers' Association as source for any re-use of the data in this report.