Lowest-Income Families in California Still Pay the Most in Taxes

Even With Proposition 30’s New Rates, Families With Smallest Incomes Pay the Largest Share in State and Local Taxes


SACRAMENTO – The temporary tax increases approved by California voters last year, while largely targeted to the wealthiest residents, have not changed a key fact about the state’s current tax system: that the lowest-income families pay more than other families in state and local taxes.

Who Pays Taxes in California?, a new report from the California Budget Project (CBP), highlights data from the Institute on Taxation and Economic Policy showing that, on average, families in the lowest fifth of the state’s income distribution pay more of their incomes in state and local taxes than do other families. Families in the bottom fifth – with an average annual income of just $13,000 – pay 10.6 percent of their incomes in state and local taxes. Meanwhile, families in the top 1 percent – with an average income of $1.6 million – pay 8.8 percent of their incomes in state and local taxes. (See chart below.)

These figures account for the tax increases of Proposition 30, a ballot measure passed by California voters in November 2012. Proposition 30 added three personal income tax brackets – with additional rates of 1, 2, and 3 percent, depending on income – that apply only to very-high-income Californians and are in effect for seven years. Proposition 30 also increased the state sales tax rate by one-quarter cent for four years.

“A tax system that asks low-income families to pay the most runs counter to the basic principle of fairness,” said Chris Hoene, executive director of the California Budget Project. “We are living in an era of unprecedented income inequality. Public policies should seek to address inequality, not deepen the problem.”

Who Pays Taxes in California? also reports that the share of state revenues provided by the corporate income tax has declined steeply during the past few decades, falling from 13 percent of General Fund revenues in 1981-82 to just 8 percent in 2012-13. Meanwhile, the share of General Fund dollars coming from the personal income tax has climbed from 38 percent to 65 percent.

This growing reliance on personal income taxes to fund state services is partly the result of a reduction in the corporate tax rate – implemented in the mid-1990s – and the expansion of corporate tax breaks in recent years.

“Policy choices made during the past generation have shifted more of the cost of state services from corporations to individuals and families,” Hoene said. “When the state loses revenue through corporate tax breaks and loopholes, it creates serious budget challenges that jeopardize California’s ability to invest in education, health, infrastructure, and other foundations of a strong economy.”

Who Pays Taxes in California? is available online at the CBP’s website, www.cbp.org.


The California Budget Project (CBP) engages in independent fiscal and policy analysis and public education with the goal of improving public policies affecting the economic and social well-being of low- and middle-income Californians. Support for the CBP comes from foundation grants, subscriptions, and individual contributions. Please visit the CBP’s website at www.cbp.org.