Budget Briefs: State of California Tax Rankings

Friday, January 18, 2013

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Summary

California is a great state to live and work. The state’s climate, weather and quality of life are the envy of the country. California leads the nation with its cutting edge high-tech and biotech industries and has a rich and vibrant agriculture industry. It also has large markets, its ports are the gateway to and from Asia and it has a large pool of skilled labor.

For all of California’s benefits, it has some significant drawbacks. For the privilege of living, working or operating a business in the state, Californians are required to pay some of the highest personal and corporate income taxes in the nation, and are subjected to unnecessarily burdensome and overly complex laws and regulations.

Over the last decade, California has consistently placed at or near the bottom of many national business climate and tax rankings, which compare the business climates of the nation’s 50 states.

CEO magazine, in its 2012 annual survey of 650 CEOs, ranked California as the worst state to do business for eight years in a row. Keep in mind that they have conducted the survey for only eight years.

Forbes Magazine rated California as being the 41st worst state for business.  This report was based on six factors: business costs, labor supply, regulatory environment, current economic climate, growth prospects and quality of life.

According to the Tax Foundation’s 2013 State Business Tax Climate Index, California has the third worst business tax climate in the nation, behind only New York and New Jersey. The Index rates a state’s tax systems based on individual income tax, corporate tax, sales tax, and property tax.  It is important to note that California achieved this low ranking even before voters approved Propositions 30 and 39 in November 2012.

The next couple of pages will dissect a portion of the state’s overall tax structure, and provide a comparison of how California compares to other states in terms of the state’s major tax rates.

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