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Data Hit

Corporations Pay Far Less of Their California Income in State Taxes than a Generation Ago

January 2023 | By Jonathan Kaplan

Business and finance concept, looking up at futuristic skyscrapers in the financial district of a modern metropolis.

Corporations are contributing roughly half as much of their California profits in state taxes than four decades ago. In the early 1980s, corporations paid more than 9.5% of their profits in state corporation taxes. In contrast, corporations paid just 4.9% of their California profits in corporation taxes in 2020.

Corporations pay less of their income in taxes today than the 1980s in part due to tax rate reductions by state policymakers. Policymakers have also enacted several tax breaks that reduce the share of corporate income paid in California corporation taxes, such as the research and development tax credit.

“Did you know? California’s budget would have recevied $14.5 billion more in revenue in 2020 had corporations paid their fair share of income taxes. ”
A line chart showing corporate taxes as a percentage of income for corporations reporting net income in California where the share of corporate income paid in state taxes declined by roughly half between the early 1908s and 2020.

California’s budget would have received $14.5 billion more revenue in 2020 had corporations paid the same share of their income in taxes that year as they did in 1981 – more than the state spends on the University of California, the California State University, and student aid combined. 

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For many years, high costs of living have made it difficult for many Californians to keep themselves and their families safely housed, healthy, and nourished. Recent high inflation has made it even harder for Californians to make ends meet.

When basic costs go up, Californians with the lowest incomes are hit the hardest. About 2 in 3 California households with incomes under $35,000 had trouble affording basic expenses in fall 2022. Moreover, about 9 in 10 California adults with household incomes below $35,000 who faced rising prices reported feeling moderately or very stressed about price increases.

A bar chart showing the percentage of households reporting difficulty paying for basic expenses by household income where Californians with low incomes were most likely to struggle to pay for basic expenses in September and October of 2022.

Policymakers should make sure Californians with low incomes have the support they need to cope with rising prices and high costs of living. Strategies include:

  • boosting safety net supports
  • ensuring low wages keep pace with inflation
  • prioritizing investments that help people meet basic needs like affordable housing, health care, and child care.
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Having a safe, stable place to live is crucial for student development and educational success. But more than 220,000 of California’s public K-12 students experienced homelessness in 2020-21. This includes children temporarily staying with other families due to economic hardship, and children living in motels, shelters, vehicles, public spaces, or substandard housing.

“More support is needed for California’s Latinx, Black, Indigenous, and Pacific Islander K-12 students who disproportionately experience homelessness.”

Latinx, Black, American Indian, Alaska Native, and Pacific Islander students were disproportionately likely to experience homelessness. These students also experience high rates of chronic absenteeism causing them to lose critical access to curriculum and social structures that schools, educators, and peers offer.

A bar chart showing the percentage of public K-12 students considered homeless during the 2020-21 school year where California's Latinx, Black, Indigenous, and Pacific Islander students disproportionately experience homelessness.

Students’ housing situations shouldn’t block them from learning opportunities. Policymakers should boost investments in safe, affordable housing and target additional funding and resources for students who experience homelessness to ensure every California K-12 student can thrive in school and life.

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Everyone wants to live in safe communities, and data show California continues to experience crime rates well below historical peaks. The property crime rate — the number of property crimes per 100,000 residents — was 2,178 per 100,000 in 2021, far below the peak of 6,881 in 1980. The violent crime rate was 466 per 100,000 in 2021, less than half the 1992 peak of 1,104.

“Despite a rise in property and violent crime rates in 2021, data show California continues to experience crime rates well below historical peaks.”
Line Chart: Property and Violent Crime Rates in California Remain Well Below the Peaks of the Past Five Decades

Crime rates recently increased across the nation as the COVID-19 pandemic took its toll. In California, between 2020 and 2021 the property crime rate rose by 3% and the violent crime rate went up by over 6%.

Any rise in crime is concerning, even as crime rates remain at historic lows. Policymakers should avoid resurrecting the failed, incarceration-focused policies of the past. Instead, state leaders must advance strategies to reduce youth violence, strengthen families and communities, and target the longstanding structural barriers to opportunity — such as poverty and housing instability — that disproportionately impact Black, Latinx, and other Californians of color.

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