Summary of California’s Upcoming New Tax Hikes

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A lot of states are struggling these days, including the Golden State. Even though California already had the top marginal personal income tax rate and highest base sales tax rate in the country, they are getting even higher. According to a legislative study, the following four tax increases will make an average family of four with an annual income of $75,000 pay $963 more a year in taxes. Here’s how it breaks down:

#1 – Sales Tax
Starting April 1st, the base sales tax rate will rise from 7.25% to 8.25%. While this is only one additional penny per dollar, relatively it is a 12% increase in sales taxes. The base rate doesn’t include taxes added by individual cities and counties. For example, the total sales tax rate in San Francisco will now be 9.5%. In some cities it will break 10%.

#2 – State Income Taxes
Personal income taxes would increase across the board by 0.25 percent on taxable income for 2009. The highest bracket is now 10.55%. A single person with more than $47,055 in taxable income will be in a marginal bracket of 9.55%. Remember, this is on top of Federal income taxes.

Examples: This equates to an additional $125 for taxpayers filing jointly with $50,000 in taxable income, $250 for taxpayers filing jointly with $100,000 in taxable income, and $1,250 for taxpayers filing jointly with $500,000 in taxable income.

If California receives $10 billion or more in certain types of assistance from the federal stimulus package, the tax increase would drop by half to 0.125 percent. However, a recent study by the state Department of Finance has found it unlikely that this level will be reached ($2 billion short).

#3 – Annual Vehicle Licensing Fees
These fees will double, to 1.15% of the car’s value each year. On a new car valued at $25,000, the vehicle license fee will be $288. The increased fee is effective on registrations beginning May 19.

#4 – Dependent Tax Credit
This tax credit will be reduced by $210 (for each dependent).

Sources: LA Times, SF Chronicle, Sacramento Bee.

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  1. ouch.

    Property taxes weren’t mentioned. I live in Wisconsin and that is the big issue here. Property taxes pay for schools and I assume other local services.

    Our sales tax is only around 5% in WI but many of us get around even that small amount by buying things online from out of state companies.

    Is the sales tax in California “earmarked” for any specific expense? such as waste disposal, recycling programs or anything else that would directly relate to consumption of goods?

  2. How about cutting spending for every liberal program under the sky first? Nah. One you start a program you can’t stop funding it.

  3. bangbang says

    Dammmnnn you California! If I wasn’t so entrenched in my living situation, I would so move to another state. And, Arnold, I asked this question years ago and I’m going to ask it again. Who the hell voted for you as our governor? Go hang out with Bush. Or go back to Hollywood or something. Sheesh.

  4. Wow, I would think the higher sales tax would drive more people to the internet for shopping instead of buying local.

    How does the state determine the value of your vehicle?

  5. Banditfist says

    Prop 13 – California is screwed. Repeal it. There just hasn’t been a politician born yet that has the guts to even suggest it.

    California is even more screwed with all the forward borrowing they have done. They are running a deficit when states cannot run deficits.

    The unfortunate effect of the stimulus bill is that it will not make state and local legislatures fiscally responsible. It continues on with the same spend spend spend mentality.

  6. ched – buying online does not exclude you from sales tax in most states. you may not have to pay it at the point-of-sale but you are required to report it on your state income tax filing and pay it then if you have not already. lots of people don’t do this and get away with it but should you ever be audited realize that you will pay a penalty for skirting your state’s tax department.

    as for the mess that CA got itself into, don’t even get me started. I got accepted into grad school there a year ago but wisely turned them down because my wife would never have found a teaching job there. they had 10% cuts across the board last June where nearly all teachers hired after Sept 2004 lost their jobs.

  7. Thanks Scott, I have never even heard of that before. Hope I don’t get audited!

  8. well, *one* town will be above 10%

    Keep in mind that the VLF is going up to less than what it was when Schwarzeneggar campaigned about cutting the VLF during Davis’s ouster in 2003.

    And also, at least for the moment, all these tax hikes are scheduled to be temporary. An opinion piece on that:

    I say this not in apology for California, since I think the state is messed up beyond belief, as the Legislature has its hands tied on what it can spend money on, but just to put some of this stuff in context.

  9. I think JP has it right – but, CA is a liberal state, so no hope for cutting the fat and liberal programs. Rather, CA chose to tax it’s productive citizens even more. What an embarrassment.

  10. Reading information like this always improves my mood. Why? Because it makes me grateful that I do not live in California. I do not understand why there is not more of a mass exodus from that tax and real estate hell-hole.

  11. Scott, If you are required to pay taxes for online sales, how come turbo tax never even asks you that question? That sounds very fishy. From what I understood if you are buying somehting from a store that does not have a location in your state you dont pay sales tax. This has been true for years before the internet with mail order stuff.

  12. This is just the tax of living in California. Living with great weather. If you want lower taxes move to Alaska, Florida, Nevada, South Dakota, Texas, Washington, Wyoming or Tennessee.

  13. TurboTax does ask about internet purchases. CA has to be the worst state to live work in – horrific traffic, illegals EVERYWHERE, LA smog, they tax you to death, beaches with tar in them (disgusting – good luck getting that stuff off your hands-feet) and they tax the living heck out of ya!

  14. Jacobs, I don’t know why Turbo Tax never asked you that question, but it’s true that you’re required to report online purchases and pay the taxes. Currently, states cannot collect taxes from businesses in other states. So there’s no way to collect taxes for online purchases made in other states. And it’s not cost effective to go after everyone to collect taxes for online purchase either, so states can’t do much about this.
    NY just passed law to make Amazon to collect taxes for purchases made from NY states. Amazon is fighting back.

  15. And that is why I don’t want to live in Kalifornistan……

  16. Come on down to Texas, guys. I’m living here on 20ac with no development and white water rivers to kayak on after a hard day of internet work. At night I can see the milky way and watch the falling stars as far as the eye can see. Yesterday I soloed in a little airplane off my neighbor’s ranch. Great hospsital. No lines anywhere in this town and lots of open spaces. No income tax here. Did I sell you yet on Texas? Come on down. There’s a reason the early settlers left the north’s crazy lifestyle and said “you all can go to hell, I’m going to Texas” ~ Davy Crockett.

  17. (exhale)……

    I don’t know where to begin on this matter. California’s middle-class is being snowed.

    Sad thing is, they don’t know it. The union movement convinces voters over and over and over again that children and homeless people are being hurt.

    The facts are that administrative costs in almost every union environment and special interest program are what are killing this state and no politician wants to address it.

    I am of the belief that you don’t just move (run from the problem)…….you fix the problem. And that’s what I’m trying to do.

    If any Californian is reading this, and is interested in changing things for the better…….

    Get involved and let Cali politicians know that we’re not putting more money into the bucket until they fix the leak at the bottom of it!!!!!!!! 🙁

  18. Although California is ahead of the curve on so many things, our government is truly A$$-backwards! I just went on the Franchise Tax Board website and found that the state is giving a home-buyer credit of 5% of the purchase price of the home, up to a max of $10,000, for qualified homes (homes THAT HAVE NEVER BEEN OCCUPIED) purchased between 3/1/2009 and 2/28/2010.

    Lucky us, we have a government that keeps taking money away from schools, but sets aside $100 million to pay residents to buy homes from developers, even though over-development contributed to the mess we’re in now. I guess that’s what happens when they sit on their hands for months not working on a budget, then hastily pass a budget through before anyone really sees what’s in it.

    Then state layers tax upon tax on its residents so that people who already can’t afford to pay off their credit bills end up buying even less?? And how are these steps supposed to help the state get out of the RED?

  19. I am a newbie to economics, from what I understand, people will cut spending for a higher tax rate -> less government tax revenue, less manufacture order, layoff workers, which makes the economy even worse. I think right now government should issue more debt/bond and increases government spending and lower tax rate to encourage people to spend. The debt/bond will be paid eventually because of increased sales.
    Can someone explain what I am missing here? thanks

  20. I had no idea that there was going to be a 1% tax increase in California sales tax. It just makes me want to move to a state with lower taxes!

  21. Nick, some people need to be near cities out of necessity (their skills are only needed in metro areas for example). I doubt a lot of people on this blog would be able to stand rural TX for more than a few months. And I’m sure there’s some bias towards locals when it comes to employment. Been there, done that.

    If you can make a living totally on the internet, that’s a different story.

  22. Alexandria says

    Sorry, but I have disagree that California has the highest income and sales tax rates. This is simply not true. Some of the highest rates? Indeed. Not “the highest.” There are a lot of cities and states with higher overall taxes.

    Property taxes probably not mentioned because they are rather on the low side compared to many other areas.

    Online sales tax – yes you need to report it on your individual tax return (in Cali). Last I checked Turbo Tax was not 100% correct on preparing taxes. It’s not the authority anyway. This is becoming a pretty high audit area as the state scrounges for cash. They are auditing businesses and when they find ones who didn’t collect/remit California sales tax, they go after their customers. (Depends on the state of course – but California is quite aggressive on collecting sales tax).

    On the flip side, California has some of the cheapest access to education. It’s give and take. California has serious issues, for sure. But I still rather live here than most anywhere else. (I don’t live in LA or SF – for sure – escaped the Bay in 2001. THere are plenty other nicer areas to live).

  23. Ugh… why did I go to cali for grad school? OH right, i got tricked by the weather that I never enjoy.

  24. Why in the world would they be raising CA taxes? I thought the plan would be to keep spending and let the fed make up the difference every year 😉

  25. CA property taxes aren’t mentioned because they are low? Hmmm.. The OC/LA counties were 1.75-2% of some rediculously priced 800K 10×10 box of which 800K is taxable = $16,000 in property taxes. So let’s just say you were stupid enough to buy a house in OC/LA anytime between 2004-2007 and make 100K as a single person and bought this shack for 800K. LOL.

    100K income
    -$16,000 property tax
    -$9,500 state income tax
    -$6,200 fica
    -$15,000 federal income tax
    -$1,450 medicare

    leaves you with 52,000 to pay off a 600-700k mortgage on an house that’s worth maybe 400-500k, pay another 8-9% in CA sales tax on almost everything you buy 🙂

    Enjoy the uh, “slave to a state” .. I mean, OC lifestyle. 🙂

    “Renting is Patriotic” – Kudlow

  26. @Rob

    Damn, I can’t stand those illegals here in California, raping Amurrikka! DEY TUK UR JERBS!

    You sound like you had a bad experience in LA once. Try this on for size: LA != California. Every place in CA does not have the same traffic and pollution problem as LA. Have you ever been to a beach in San Diego? Santa Cruz? Maybe Monterey? The California coastline is replete with gorgeous, clean beaches.

    Not even a California native, just trying to refute some irrational nonsense.

  27. Justjoeguy says

    California has been taken over by illegals, unions and kooks, the main kook being Arnold. Just a few days before signing this so-called budget he said he wanted to be President when he isn’t qualified in the first place–he’s not natural born. Who would vote for a guy like that? Aren’t there any rational people left in the world? Is it any wonder the U S is in such deep trouble.

  28. A few responses from someone that actually lives in CA.

    1. Turbo Tax does address internet sales/usage tax when you complete the state portion of the program.

    2. California does not have the highest sales tax in the Country. Look at IL. Over 10% in some counties.

    3. California does have low property taxes when compared to other states.

    4. Illegals are a problem in a number of states that are no where near the border.

    5. CA has it’s problems, I’m the first to admit, but life here is better than places I’ve lived before.

    My own opinions….no need to flame if you disagree.

  29. I live in California, don’t mind living here, and don’t mind paying the extra taxes either. I understand that in hard times, if we want to continue the great programs we have, the money is going to need to come from somewhere. California is a great place to live and that’s why we have so many people living here.

    Our system isn’t perfect, but I don’t want to see schools screwed just because I couldn’t give up a few extra hundred dollars a year. I’m in the top tax bracket, so I won’t be hurt as much as the next guy, but the higher tax brackets pay most of the taxes anyway, right?

    Oh and yes, I’m a crazy hippy liberal when it comes to helping people who can’t make it on their own (poor, underprivileged) and a crazy conservative when it comes to helping people who can (“boohoo I paid too much for a house I couldn’t afford”).

  30. Regarding the top *marginal* tax rate, and highest *base* state tax rate (not including county+city taxes like Chicago), please see the details here:

  31. the problem are prisons are costing CA way too much, overcrowded! Arnold keep cutting education money (the wrong thing to do) for prison and other programs. We need more education money in order to achieve success. They took our JERRBBBBBBS!

  32. Hmmm. I lived in both IL and CA (for short periods of time as a renter) with 6 figure income and I don’t remember paying anywhere near CA’s 9.5% rate. I remember 3’s or 4’s. Nothing too much. Enjoy the tax payments. I’ll take Texas and it’s 0% rate.

  33. Texas has a 0% income rate, but ~3% property tax rate.

    CA has a low property tax rate in comparison, but the house values are so high that the effective tax rate wrt the median US house price is much, much higher than many places.

    Ive been to TX – Ill stay here in CA and write my legislators and fight to lower taxes before I cut and run. There is a reason CA RE is so expensive, esp. the bay area, but I dont really need to get into that. Suffice it to say that there are other great and cheaper places to live, but for the majority of ppl, it is hard to beat CA. I did read an interesting book on the subject of moving into “fly-over” country:

    Besides, there are ways to avoid taxes such as earning less, spending less, and implementing legal but aggressive tax avoidance strategies. Im not sure at what level taxes will need to go before you actually get a loss in revenue, but there is a theoretical tipping point whereby you get less tax revenue by increasing taxes as Min suggests. Check out this link:

  34. I live in Austin, TX… No state income tax whatsoever and it is far from rural.

    Sales tax is 8.25%, and property tax varies, but for me is around 2% of home value.

    Every year I thank my lucky stars when I don’t have to file a state return. In essence, it is almost like the fair tax. If you buy more and use more resources, you get taxed more through the higher sales tax. You get taxed on what you buy, not on what you earn.

  35. About CA property taxes:

    Property taxes are 1% of the value of your house at the time you bought it (more or less), plus whatever voter approved bonds each different area had on the ballots over the years. My property taxes are essentially 1.25% when everything is taken into effect.

    Prop13 fixed tax rates at 1% based on the sale price of your home or its value in 1978 (whatever is later) and fixed the increase in assessed value of your house to only 1% a year. Therefore a house bought before the housing bubble was determined to only have increased 1% in value even though its market value might have gone up 25-50% that year.

    My 2008-09 property taxes were the same as my 2007-08 property taxes, but every indication suggests my 2009-10 property taxes will decrease by 25%. More than likely this will offset the increases in the other taxes that Jonathan noted.

    My overall taxes paid to CA might actually go down this upcoming fiscal year.

  36. Being generous with other people’s money is thievery. That’s what California’s government is doing. It punishes those that work for a living and rewards the bums.

  37. and I thought Massachusetts was bad.

  38. I’ve lived in both TX and CA – no comparison TX is the better state for quality of life, financially, and friendly people. There’s a reason OC/LA home values are falling 40-50% while places like Southlake TX continue to go up even in this economy. It’s tax frendly for people and businesses for starters.

    1. Southlake, Texas
    Median Household Income: $172,945

    The median income in this Dallas suburb has grown by more than $40,000 since the 2000 census, and that’s mostly due to inflation and real estate growth. In 2005, the city doubled its town square shopping center. Travel tech company Sabre Holdings is also headquartered here, employing about 3,000 of the company’s total 9,000 employees.

  39. I have lived in a couple of other states and I will never leave CA again. The higher taxes suck, but what do you expect when 1% of the population has 90% of the wealth. I am with DAVE. If you bought a home you could not afford. You should be out on your ass. You did this to yourself. I didn’t buy a home because I could not afford a real home loan so why should I pay to keep you in your home if you were not smart enough to buy a home you could afford. THIS IS YOUR FAULT TAKE RESPONSIBLITY FOR YOUR ACTIONS.

  40. Citizen_Kane says

    The damn freaking government is responsible party. They caused the spending to get out of control. Now they want to raise Taxes to fix their screw-ups. The worst thing is they are still there wasting more money.

    You’re Fire!

  41. Jeff Republican says

    So many interesting views on the topic at hand.
    Let me say, that as a Californian and an American, I feel cheated by the liberal minded majority in Sacramento, who are riding on the coattails of the new liberal administration in Washington.
    The “gala event” has finally arrived for them all, and their “party favors” consist of Tax, Spend, and Control.
    A caution to those who pity CA taxes, your own reckoning day is fast approaching if we fail to stop the current trend of madness across our crippled, but still free nation.
    Wake up America, please!

  42. Great weather, horrible government and taxation. Total fiscal mismanagement:……. the entitlement state gone crazy. Premiering soon nationwide.

  43. I live in California. How do I file for political asylem out of here! I dont mind being a Refuge in another state! I mean Cali has been takin over by a invading Army, Right! From Mexico right. So i have to pay SLAVE TAX to support them. I suport the invation of an enemy that is taking over My country! The Army is even worried if they are out guned!

  44. We are putting a pool in and have applied for a permit. Does the tax increase in April affect me? It is an unincorporated city.

  45. Like everyone else the people of California are going through economy down turn, and the solution to raise taxes so that my political officials can maintenance their life styles?
    Everyone’s short on money but we can not ask our employers to give us a raise, why should the state?

    This short sighted solution is digging us into a deeper hole, we should be lowering taxes to encourage spending, we should be cutting out the so called Non profit organization that drains the tax pools. Imagination a Non profit organization working for the city you live in holding a conference in Las Vegas, hotels, air fare, fine dining, paid for by your tax dollars. Generous salaries retirement packages and benefits all from your tax dollars.
    There is clearly a problem with the states spending, no matter what the tax percentage is if the spending can not be controlled it will never be enough.

    We are paying taxes to those who are suppose to protect the nation from the current financial crisis. When they should have been regulating the financial institutions from scamming scheming on those looking for hope, instead sold the optimistic public an artificial dream that has become a nightmare to the nation. Yet we are left again to wipe their asses for the mistakes we did not make for choices we did not vote on. As unemployment rate climbs and people with jobs are taking salary cuts, the systems hitting us with more unjustified taxes to satisfy their needs.

  46. I also heard that California is imposing a .39 cent gas hike. but there not calling it a tax.. BS

    lets stop paying our Senators , Congressman and rep. for life when they retire…
    Lets make them pay into to Social security, medicare, and use the same health care system we use. Our Senators and Congressman, rep. of the house talk about the rich, they are the rich/elite. Its time to clean house in washington..

  47. Does any of the government financial staff know what they are doing?
    I am so tired of getting riped off…..Its time the people of this once great country to take back control……Charge every illegal action made by our statesmen/women and show them there will be consequences for illegal actions “Nancy Pelosi” STOP funding programs for illegals….Come to this country the right way or don’t come at all…

  48. My wife and I are naturalized citizens. When we entered this country 14 years ago we did not expect that has happened to us now. We have lost access to medical help couple years before we turned 60. We did not expect that we would have to support children of illegal immigrants along with their parents who don’t want to work. We were targeted by thieves and murderers last year because we had no relatives in this country so nobody would come up on our behalf if we disappear as many already did. We’ve been cut off from our relatives forever by this evil government as “thanks” for my help in time past. We did not expect such absence of basic personal freedom here. What an evil barbaric country is this US!!!

  49. Alex ! Please, do Not blame USA for your situation now.. Economy
    hit absolutely everyone, not only you. It’s too harsh to say –
    USA is barbaric country.. USA did NOT cut you off from your relatives.
    Unated States Of America is still great country. Economy ? Well,
    It’s global problem. And I have small money to live on, but I do beleive, that economy situation will be improved. I know, that thousands of families are facing to huge finance difficalties, so much pressure.. But, again.. I do believe that everything will be better.
    It’s temporary, just death is forever.

  50. Ouch! just finished my California tax return and paid lots more in state tax than last year.
    n 2008 – I made $70,494 and after deductions for my 5 children my net taxes were only $147.
    In 2009 – earned $62,297 but my taxes went up to $884. Reason is the dependent exemption for my 5 kids dropped from $309 per kid to a measly $98 per kid (dependent).
    This amounts to an aggressive attack by the California government on working families who make over $50,000 and who have lots of children.

  51. i just received a lketter from the CA franchise board that i owe more taxes. its not enough that they take 10,000 or more of my money yearly the money i work hard for not them because my employer didnt take ebnough taxes out so i ask for installments and i want to put some on my cc today thats an extra $ 200 to pay them on cc and I incur penalities everyday until it is pay. Then in CA the bridge toll is going up $2 more now it will cost 6.00 to go to work everyday. Soon they are going to charge to use the car pool lane. The roads are bad there is so much traffic it takes you 21/2 hours to go from san Leandro to san fran when it should only be a 1/2 we pay higher gas prices for cleaner air and to get a smog check and to have to fix your smog could cost 1500 or more. Our schools are not teaching our children because the teachers are expected to teach a much bigger class. People do not respect one another they are killing people on the streets here in the daytime. A parking ticket is 80.00 and there are so many police writing tickets its ridiculous. you have to pay to make a phone payment 3.00 everyone here sucks you dry for a dime. The politicians ignore the real truth while there are a extremely large amount of illegals here who get paid under the table and dont pay any taxes for the roads they drive on or the schools their children use they dont have insurance but they have a license. My son was a marine in Iraq at the age of changed his whole life what does he get for that nothing Our kids are expendable. They have no concern for the welfare of our children. i am a good person who works hard everyday only to struggle in California. They are so concerned about the enviroment what about concern for the people. unfortunately I would not be able to find a job anywhere else. I dont know how to do anything else and Im not a spring chicken so i am forced to struggle everyday here . what kind of a life is that. Politician need to wake up stop playing gaMES AND BECOME CONCERNED FOR THE PEOPLE NOT THE MONEY THAT LINES THEIR POCKETS. OUR GOVERNOR IS ONLY PRESENT AT THE OFFICE 3 MONTHS OUT OF THE YEAR IF THAT. DO YOU TRULY THINK HE WAS ANY IDEA ON WHAT STRUGGLING TO LIVE IS ALL ABOUT

  52. Ron Staiger says

    California SHOULD tax more. Bang the rich, choke ‘em, hang ‘em upside down to collect their spare change too. Get every cent from every Californian still stupid enough to remain in the Land of Lunacy. While you’re at it, pass a resolution that all members of the Actor’s Guild will be taxed at the new rate of 90%- to cover all of the leftist mantra spewing from their vile lips. When you’ve squeezed every last cent from the filthy rich, create a new flat tax so that the entitled ones who currently pay no tax at all can ante up and pay a “resident’s tax” on every bottle of Thunderbird, every pack of smokes, every lottery ticket and every lap dance they buy. Then, when you’ve collected every last dime, raid the pension plans of YOUR State and Municipal workers, cut the medical plans of YOUR State and Municipal workers to a bear minimum, make your state legislature and municipal councils PART-TIME with no benefits, and deport every illegal immigrant. Then, drill your own damned oi since you have more than Texas and Saudi Arabia COMBINED (but your enviroterrorists refuse to allow Californian hands to get dirty with California oil) then and only then, when it becomes quite obvious that even those sources of funding just won’t be enough to offset your previous fiscal irresponsibility, you have the Nation’s permission to come crawling on your hands and knees and beg for a bailout from the rest of us- BUT NOT UNTIL THEN!

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