Income Taxes Paid by “Top 1 Percent” Highly Volatile. The share of California’s personal income tax (PIT) paid from the 1 percent of PIT returns with the most income is highly volatile. PIT payments by the top 1 percent are driven by rises and falls in stock and other asset prices. The average income for returns of the top 1 percent was less than $1.3 million in 2009 after asset prices crashed, but had increased to over $1.9 million by 2012. It peaked at over $2.4 million in 2000 at the height of the dot-com boom. The top 1 percent reported about 25 percent of all the adjusted gross income reported on Californians’ PIT returns in 2012, as shown in the figure above.
Proposition 30’s Temporary Rate Increases. The share of income taxes paid by the top 1 percent increased in 2012 partly as a result of Proposition 30, which temporarily raises tax rates on single filers’ income above $250,000 a year and joint filers’ income above $500,000 a year. The top 1 percent of California resident income tax filers paid just over 50 percent of overall PIT revenues in 2012, which appears to be an all-time high. (For more information, see Exhibit A-10, Page 4 of 4, of the Franchise Tax Board’s May 2014 estimating exhibits, as well as other pages in that packet.)