NCPA - National Center for Policy Analysis

California Tax System is Antagonistic to Business

September 2, 2003

California boasts the second most onerous tax system for business among the 50 states, second only to Mississippi, according to a recent study of state tax climates by the Washington, D.C.-based Tax Foundation. With the exception of property taxes, which voters limited through Proposition 13, just about every tax Sacramento levies ranks among the highest or most burdensome in America.

Start with the individual income tax, which has six brackets and is steeply progressive:

  • Its top marginal rate of 9.3 percent is among the nation's highest but, worse, it kicks in at just $38,000 of income.
  • This means that the likes of nurses and janitors already pay to the state a dime of every $1 in higher salary they receive.
  • Most small business owners pay at the same onerous individual rate.
  • As for bigger business, the state's 8.8 percent corporate tax rate is the highest in the West and the 10th highest in the country.

Some states will make up for high income-tax rates with lower sales taxes, but not California. Voracious Sacramento hits consumers with a state and local sales tax rate that peaks at 8.75 percent -- again, among the nation's highest.

There's also a complex and expensive tax compliance arrangement that involves determining what's subject to double- and alternative minimum taxation. Add it all up, say Tax Foundation analysts, and statistically speaking, every aspect of California's tax system is antagonistic to business development and economic growth.

Source: Editorial, "The State of Taxes," Wall Street Journal, September 2, 2003.

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http://online.wsj.com/article/0,,SB106247146917513400,00.html

 

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