For over six years, California has had a top marginal income tax rate of 13.3 percent, the highest in the nation. About 150,000 households in a state of 40 million people now pay nearly half of the total annual state income tax.
The state legislature sold that confiscatory tax rate on the idea that it was a temporary fix and would eventually be phased out. No one believed that. California voters, about 40 percent of whom pay no state income taxes, naturally approved the extension of the high rate by an overwhelming margin.
California recently raised gas taxes by 40 percent and now has the second-highest gas taxes in the United States.
California has the ninth-highest combined state and local sales taxes in the country, but its state sales tax of 7.3 percent is America’s highest. As of April 1, California is now applying that high state sales tax to goods that residents buy online from out-of-state sellers.
In late 2017, the federal government capped state and local tax deductions at $10,000. For high earners in California, the change effectively almost doubled their state and local taxes.
Such high taxes, often targeting a small percentage of the population, may have brought California a budget surplus of more than $20 million. Yet California is never satiated with high new tax rates that bring in additional revenue. It’s always hungry for more.