Where Does California Rank?

California is a high-tax state, with some of the steepest sales tax, personal income tax and corporate tax rates in the nation.

For businesses seeking to create jobs for Californians by locating or expanding in the state, taxes can be a major obstacle. California has the third-worst state business tax climate in the nation, according to a January 2012 report from the Tax Foundation, a national tax research organization that tracks state taxes in its annual State Business Tax Climate Index.

Here is how California compares to other states in terms of major taxes:

State Sales Tax: Highest in the Nation

California levies a 7.25 percent general sales and use tax on consumers, which is the highest statewide rate in the nation. Local governments are permitted to levy another 1.5 percent. Click here for the State Board of Equalization's detailed description of the statewide sales and use tax rate, and here for information on additional city and county sales tax rates.

Gasoline Tax: Second Highest in the Nation

California's statewide gasoline taxes and fees total 48.6 cents per gallon, the second highest in the nation, just behind New York (49 cents gallon) and tied with Connecticut (according to the American Petroleum Institute, for rates effective January 1, 2012). When the federal gas tax of 18.4 cents per gallon is added, Californians pay 67 cents in taxes for every gallon of gas they purchase. Additionally, California's general sales tax and various local sales taxes are levied on the sale of gasoline — and the sales tax is calculated after the state and federal excise taxes are added to the price, so motorists pay a tax on a tax.

Personal Income Tax: Second Highest in the Nation

California's personal income tax has the second-highest rate and one of the most highly progressive structures in the nation. As of January 2012, the top rate of 10.3 percent was surpassed only by Hawaii, which has a top rate of 11 percent. Oregon's top rate had been 11 percent, but fell to 9.9 percent in 2012. Most small businesses are S Corporations, partnerships, or sole proprietorships, and pay their business taxes at the rates for individuals, which makes California's taxes on small businesses some of the most burdensome in the nation.

Corporate Income Tax: Highest in the West

"Corporations looking to relocate, or even establish, a business in the West may shy away from California, as the state's 8.84 percent flat rate is the highest corporate tax rate in the West," the Tax Foundation said in 2011. Nothing has changed, as the group's 2012 Business Tax Climate Index report shows that other Western states still have much lower corporate tax rates. Nationally, only eight states have a higher top corporate tax rate than California (Alaska, Illinois, Iowa, Maine, Minnesota, New Jersey, Pennslyvania and Rhode Island).

Property Tax: High, Even Under Proposition 13

In its 2012 State Business Tax Climate Index, the Tax Foundation ranks the 50 states on property tax collections per capita. As of July 1, 2011, property taxes in California were $1,458 per capita, ranked 14th highest nationally. Without Proposition 13, the 1978 voter-approved initiative that set limits on property taxes for California property owners, the state likely would rank even worse.



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