Skip to content
Data Hit

California’s Top 1% Grew Richer During the Pandemic

Middle-Income Californians Experienced Stagnating Earnings During the Same Period

November 2023 | By Alissa Anderson

Los Angeles California - Beverly Hills landscape and mansions aerial view late afternoon

key takeaway

Income inequality in California widened during the COVID-19 pandemic, with the richest 1% taking home a record share of statewide income. Policymakers can address this by closing tax loopholes for the wealthy and profitable corporations.

California’s rich got richer during the pandemic. Recent data show that in 2021, when many Californians were struggling amid the COVID-19 recession, the share of statewide income going to the richest 1% spiked to a new high. The top 1% held nearly one-third (30.5%) of all income reported for state tax purposes that year — up from 23% in 2019 and their highest share on record (data before 1970 were not available). In fact, the top 1% held more income in 2021 than they did in 2000, at the peak of the dot-com boom.

Income inequality worsened in the pandemic. The average income of Californians in the top 1% rose from $2.3 million to $3.6 million between 2019 and 2021, while it declined for middle-income Californians, from $46,600 to $46,400. As a result, the top 1% had 78 times the income of middle-income Californians, on average, in 2021, up from 49 times the income just two years earlier. In fact, the average Californian in the top 1% earned in just five days what the average middle-income Californian earned in a year.

Californians want state policymakers to reduce inequality. Strong majorities of Californians know that income inequality has worsened and they want state policymakers to do more to address this problem, according to polling by PPIC. State leaders can do this by closing tax loopholes that favor the wealthy and profitable corporations in order to prioritize the significant investments needed to make housing, health care, child care, and other basic needs affordable for all Californians.

related content

Learn how California tax breaks are distributed in our Data Hit: Less Than 2% of State Tax Breaks Go to Californians with Low Incomes.

Poverty & Inequality

You may also be interested in the following resources:

Stay in the know.

Join our email list!

key takeaway

California’s refundable tax credits for low-income residents make up a small fraction — less than 2% — of the state’s nearly $80 billion of tax breaks, which disproportionately benefit profitable corporations and the wealthy.

California’s three refundable tax credits — the California Earned Income Tax Credit (CalEITC), the Young Child Tax Credit, and the Foster Youth Tax Credit — are the only credits that benefit people with very low incomes.

Yet, these credits make up less than 2% of the nearly $80 billion total cost of state tax breaks for individuals and businesses. Many of these other tax breaks largely benefit high-income individuals and profitable corporations.

Everyone deserves an opportunity to achieve economic security. State leaders can make the tax system more fair by expanding credits that reach Californians with low incomes.

A donut chart showing the estimated cost of tax breaks in the fiscal year 2023-24 where tax credits for Californians with low incomes make up less than two percent of individual and business income tax breaks.
Taxes & Revenue

You may also be interested in the following resources:

Stay in the know.

Join our email list!

California’s subsidized child care providers deserve fair and just wages for their essential work that helps children learn and grow. These early educators  — who are primarily women and disproportionately women of color — offer affordable early care and learning options for working families struggling to make ends meet.

State leaders have not consistently and adequately increased provider payment rates. For example, since 2016-17 payment rates for voucher-based providers have not kept pace with the rising minimum wage, one of the major costs of providing care. Since 2016-17, the state’s minimum wage has increased by more than 50%.

A bar chart showing the percent change from 2016-17 to 2022-23 in regional market rate ceilings for selected counties where payment rate increases for voucher-based child care providers have fallen short of increases to the minimum wage.

Recent budget actions initiated a process for long-term rate reform. However, providers and the families they serve cannot wait for fair compensation. Policymakers should significantly increase rates in 2023-24 to ensure child care providers can keep up with costs, keep their doors open, and continue to offer invaluable care to children and families.

Child Care & Preschool

You may also be interested in the following resources:

Stay in the know.

Join our email list!

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.

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. 

Taxes & Revenue

You may also be interested in the following resources:

Stay in the know.

Join our email list!

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.
Poverty & Inequality

You may also be interested in the following resources:

Stay in the know.

Join our email list!

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.

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.

Education
Housing & Homelessness

You may also be interested in the following resources:

Stay in the know.

Join our email list!

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.

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.

Justice System

You may also be interested in the following resources:

Stay in the know.

Join our email list!

California is home to the California State University (CSU) and the University of California (UC), which educate thousands of students every year and help them build strong futures for themselves and their communities. CSU and UC require that high school students complete certain courses, known as A-G courses, to be eligible for admission.

“
Policymakers can improve CSU and UC access by reforming course requirements so that all students have an equitable chance to pursue higher education.
”

However, California high school students do not have an equal opportunity to successfully fulfill this requirement on their pathways to higher education. In 2020-21, many student groups graduated high school without completing the A-G pathway at rates that were higher than the state average of 48%. These groups include students with disabilities, English language learners, students experiencing homelessness, and students of color.

Policymakers can improve CSU and UC access by reforming course requirements so that all students have an equitable chance to pursue higher education, irrespective of their socioeconomic backgrounds.

Education

You may also be interested in the following resources:

Stay in the know.

Join our email list!