Those accustomed to seeing taxing and spending data in one Cal-Tax research bulletin should note that the two reports now have been split into two documents. The bulletin on California government spending will be published subsequent to this report.
|Property Tax||Sales Tax||Personal Income Tax|
|Corporate Income Tax||Total State & Local Taxes||State & Local Fees|
|State & Local Taxes & Fees||Federal Taxes||Grand Total: State, Local and Federal Taxes|
Some analysts, however, often those advocating higher taxes, prefer to use a measurement of taxes and fees per $1,000 of personal income. Cal-Tax recently published a critique of tax burden measurements (see How (Not) to Measure Tax Burden, March 15, 1996 Cal-Tax Policy Brief), urging caution when measuring taxes against personal income. This measure of tax burden is inherently biased to place high-income states low in the rankings. Conversely, many of the states that rank higher than California are there merely because they have very low incomes.
Because this measure of tax burden is skewed by income, it is virtually irrelevant unless restricted to states with comparable income levels. Table 2 shows California's tax and fee burden per $1,000 of personal income compared to other highest-income states. California's burden is much higher than most of the states listed. Alaska is excluded from the list because its ratios are distorted by large revenue collections from oil-extracting companies, while residents and other businesses actually pay very little in taxes. Only New York and Hawaii rank higher than California, and Hawaii may not be comparable because much of its revenue is collected from tourism taxes.
Note how much higher California's tax burden is than New Jersey, Connecticut, Massachusetts, and Illinois - states that compete heavily with California for manufacturing, financial and high-technology jobs. Another important competitor is Nevada, which drew many companies from California during the recent recession; it also has lower taxes than California, with no personal or corporate income taxes.
When measured against comparable states, California's tax burden per $1,000 of personal income ranks third highest in the nation. Furthermore, several of the other states listed in Table 2 have reduced taxes recently. Because of the time lag in reporting, those tax decreases are not reflected in this report and will not show up for a few more years.
Because 1992-93 was a year of continuing employment losses and economic stagnation, tax revenues did not grow at historically normal rates. California state and local tax collections grew 3.7% from the previous year, which was the slowest revenue-growth year since 1982-83, during the prior recession.
This slow revenue growth, combined with continued population growth and mild income growth, caused many of California's tax burden measurements to drop compared to the 1991-92 figures. The exception is that many of the per worker tax burden ratios increased because slightly growing revenues were measured against a labor force that did not grow.
Because of the above-listed effects and the fact that many other states were experiencing economic recovery or continued growth in 1992-93, some of California's tax burden measurements drop relative to other states. This drop in rankings is likely to be temporary until California's economic recovery begins to show in the data. California's recovery did not begin until late 1994, and the 1994-95 tax burden report will probably be issued two years from now.
Since the early 1980s, fees and assessments have grown faster than taxes. In 1992-93, that trend accelerated dramatically. As shown in Figure 3, fees and assessments grew by $1.7 billion, slightly higher than sales tax growth, and eclipsing the growth rates of other major taxes, which only rose around $200 million each.
Figure 4 shows California's long-term trend in taxes, fees, and other revenues. Fee and assessment growth accounts for much of the increases through the 1980s. Those increases have brought California's price of government back to virtually the same level as before Proposition 13.
In other words, California governments now consume the same share of the economic pie as in pre-Proposition 13 1970s.
Federal taxes are a much larger burden than state and local taxes. Figure 1 on the front page shows that 60% of Californians' total tax burden is in federal taxes.
Table 1 shows that federal, state and local tax burdens add up to $15,605 per working California taxpayer. That is over 35% of California personal income ($355 per $1,000 of personal income).
Other studies have estimated typical tax burdens for households with different income levels. One such study, by the Washington, D.C. Department of Finance and Revenue (Tax Rates and Tax Burdens in the District of Columbia: a Nationwide Comparison, June 1995) showed the following state and local tax burdens for a hypothetical family of four living in Los Angeles:
Population as of July 1, 1993 was obtained from the Census Bureau. Labor force data for per worker calculations was obtained from the U.S. Department of Labor, Bureau of Labor Statistics. Monthly data were used to calculate a fiscal year average of labor force for each state.
Fiscal year personal income figures were calculated from quarterly data published by the U.S. Department of Commerce, Bureau of Economic Analysis.