State Taxes

Current Rate

Comments/Description

Personal Income

Marginal rates of

1% to 9.3%

Additional 1% surcharge on high incomes

(7% AMTa)

Married couples with gross incomes of $24,160 or less need not file. The top rate applies to married couples' taxable income in excess of $76,582. The surcharge is placed on taxable incomes of $1 million or more.

Sales and Use

6%b

Applies to final purchase price of tangible items, except for food and certain other items.

Corporation

General Corporations

8.84%c

(6.65% AMT)

Applies to net income earned by corporations doing business in California .

Financial Corporations

10.84%

(6.65% AMT plus adjustment)

For financial corporations, a portion of the tax is in lieu of certain local taxes.

Vehicle Fuel

18˘/gallon of gasoline or diesel fuel

Tax is collected from fuel distributors or wholesalers with equivalent taxes levied on other types of vehicle fuels.

Alcohol and Cigarette

Wine and beer

Sparkling wine

Spirits

Cigarettes

20˘/gallon

30˘/gallon

$3.30/gallon

87˘/pack

Tax is collected from manufacturers or distributors. Equivalent taxes are collected on sale of other tobacco products.

Estated

0.8% to 16%

The estate tax is a "pick-up" tax to take advantage of the maximum state credit allowed against the federal estate tax, at no net cost to taxpayers.

Horse Racing

License Fees

0.4% to 2%

Fees/taxes are levied on amounts wagered. Rate is dependent on type of racing and bet, and where the wager is placed.

Insurance

2.35%

Insurers are subject to the gross premiums tax in lieu of all other taxes except property taxes and vehicle license fees.

Local Taxes

Current Rate

Comments/Description

Property

1% (plus any rate necessary to cover voter-approved debt)

Tax is levied on assessed value (usually based on purchase price plus the value of improvements and a maximum annual inflation factor of 2%) of most real estate and various personal and business property.

Local Sales and Use

1% to 2.25%e

Collected with state sales and use tax. Revenues go to cities, counties and special districts.

Vehicle License Fee

0.65%f

Tax is applied to depreciated purchase price. It is collected by the state and distributed to cities and counties.

Other Local

Varies by jurisdiction

Types of taxes and rates vary by jurisdiction. Includes utility users tax, business license tax, and transient occupancy taxes.

a  Alternative minimum tax.

b  Includes rates levied for state-local program realignment and local public safety.

c  A 1.5 percent rate is levied on net income of Subchapter S corporations.

d  Inheritance and gift taxes have been repealed, but still apply to gifts and deaths prior to 1982. The state credit is being phased-out, pursuant to 2001 federal law changes.

e  0.25 percent of SUT revenues formerly received by local governments is used for debt service on the state’s deficit-reduction bonds. Local governments are compensated through additional property taxes.

f   The state shifted additional property tax revenues to cities and counties beginning in 2004-05 to compensate for the VLF rate reduction from 2 percent.

Proposition 13/
June 1978

·   Limits general property tax rates to 1 percent.

·   Limits increases in assessed value after a property is bought or constructed.

·   Makes Legislature responsible for dividing property tax among local entities.

·   Requires two-thirds vote for Legislature to increase taxes, and two-thirds voter approval of new local special taxes.

Proposition 4/
November 1979

·   Generally limits spending by the state and local entities to prior-year amount, adjusted for population growth and inflation (now per capita personal income growth).

·   Requires state to reimburse local entities for mandated costs.

Proposition 6/
June 1982

·   Prohibits state gift and inheritance taxes except for "pickup" tax qualifying for federal tax credit.

Proposition 7/
June 1982

·   Requires indexing of state personal income tax brackets for inflation.

Proposition 37/
November 1984

·   Establishes state lottery and dedicates revenue to education.

·   Places prohibition of casino gambling in State Constitution.

Proposition 62/
November 1986

·   Requires approval of new local general taxes by two-thirds of the governing body and a majority of local voters (excludes charter cities).

Proposition 98/
November 1988

·   Establishes minimum state funding guarantee for K-12 schools and community colleges.

Proposition 99/
November 1988

·   Imposes a 25 cent per pack surtax on cigarettes and a comparable surtax on other tobacco products.

·   Limits use of surtax revenue, primarily to augment health-related programs.

Proposition 162/
November 1992

·   Limits the Legislature’s authority over PERS and other public retirement systems, including their administrative costs and actuarial assumptions.

Proposition 163/
November 1992

·   Repealed "snack tax" and prohibits any future sales tax on food items, including candy, snacks, and bottled water.

Proposition 172/
November 1993

·   Imposes half-cent sales tax and dedicates the revenue to local public safety programs.

Proposition 218/
November 1996

·   Limits authority of local governments to impose taxes and property-related assessments, fees, and charges.

·   Requires majority of voters to approve increases in all general taxes, and reiterates that two-thirds must approve special taxes.

Proposition 10/
November 1998

·   Imposes a 50 cent per pack surtax on cigarettes, and higher surtax on other tobacco products.

·   Limits use of revenues, primarily to augment early childhood development programs.

Proposition 39/
November 2000

·   Allows 55 percent of voters to approve local general obligation bonds for school facilities.

Proposition 42/
March 2002

·   Permanently directs to transportation purposes sales taxes on gasoline previously deposited in the General Fund.

Proposition 49/
November 2002

·   Requires that the state provide funds for after-school programs.

Proposition 57/

March 2004

·   Approved $15 billion in bonds to fund budgetary obligations and retire the state’s 2002-03 deficit.

Proposition 58/

March 2004

·   Requires the enactment of a balanced budget, restricts borrowing, and mandates the establishment of a reserve fund.

Proposition 1A

November 2004

·   Restricts the ability of the state to reduce local government revenues from the property tax, sales tax, and vehicle license fee.

Proposition 63

November 2004

·   Imposes a 1 percent surcharge on incomes of $1 million and over to fund mental health services.

State Level

Legislative
Approval

Voter
Approval

Taxes

2/3

None

General obligation bonds

2/3

Majority

Other debta

Majority

None

Fees

Majority

None

Local Level

Governing Body Approval

Voter Approval

City or county “general” taxes (revenues used for unrestricted purposes)

2/3
(Majority for
charter cities)

Majority

City or county “special” taxes (revenues used for specific purposes)

Majority

2/3

All school or special district taxes

Majority

2/3

City, county, and special district general obligation bonds

Majority

2/3

K-14 district general obligation bonds

2/3

55 percentb

Other debta

Majority

None

Property assessments

Majority

Majority of property owners. Votes weighted by assessment liability

Property—related fees

Majority

2/3 of voters or majority of property ownersc

Fees—all other

Majority

None

a  Includes revenue and lease-revenue bonds and certificates of participation.

b  Exceptions: The State Constitution (1) requires approval by two-thirds of voters if the district does not meet certain requirements, and (2) specifies that a majority of voters can approve bonds used for repairing or replacing unsafe public school buildings.

c  No vote required for gas, electric, water, sewer, refuse, or developer fees.