Unaffordable California – It Doesn’t Have To Be This Way

December 2016 Update: Here’s a documented comparison of California taxes and economic climate with the rest of the states. The news is bad, and getting worse. But it doesn’t have to be this way! The state and local government policies that created an unaffordable California can be reversed.

PERSONAL INCOME TAX: Prior to Prop 30 passing in Nov. 2012, CA already had the 3rd worst state income tax rate in the nation. Our 9.3% tax bracket started at under $50,000 for people filing as individuals. 10.3% started at $1 million. Now our “millionaires’ tax” rate is 13.3% – including capital gains (CA total CG rate now the 2nd highest in the world!).  10+% taxes now start at $250K. CA now has by far the nation’s highest state income tax rate. We are 34% higher than 2nd place Oregon, and a heck of a lot higher than all the rest – including 8 states with zero state income tax – and one state (NH) that taxes only dividends and interest income.
CA is so bad, we also have the nation’s 2nd highest state income tax bracket. AND the 3rd. AND the 4th!
http://taxfoundation.org/sites/taxfoundation.org/files/docs/ff2013.pdf   Ref. Table #12
http://tinyurl.com/CA-income-tax-bar-chart
http://tinyurl.com/CA-2nd-CG

IncomeTaxGraph

SALES TAX:  CA has the highest state sales tax rate in the nation.  7.5% (does not include local sales taxes). Two 2015 bills sought a combined $10 billion++ CA state and local sales tax increase (failed to pass that year).
http://taxfoundation.org/article/state-and-local-sales-tax-rates-2011-2013

GAS TAX:  CA has the nation’s 7th highest “gas pump” tax at 56.6 cents/gallon (November, 2016).  But add in the unique 10-12 cent CA “cap and trade” cost per gallon, and CA is in the top 3 states (with PA and WA). National average is 48.9 cents.  Yet CA has the 9th worst highways. NOTE: CA state legislature leaders are discussing a new additional 17 cents/gal gasoline tax.
http://www.api.org/oil-and-natural-gas/consumer-information/motor-fuel-taxes/gasoline-tax   (CA roughly tied w/WA for highest total diesel tax)   and  http://reason.org/files/22nd_annual_highway_report.pdf

PROPERTY TAX: California in 2015 ranked 14th highest in per capita property taxes (including commercial) – the only major tax where we are not in the worst ten states. But the 2014 average CA single-family residence (SFR) property tax is the 8th highest state in the nation. Indeed, the median CA homeowner property tax bill is 93% higher than the average for the other 49 states.
http://tinyurl.com/go89o6u
http://tinyurl.com/hf6phjz
http://linkis.com/blogspot.com/Yq6cx

“IMPACT FEES” ON HOME SALES: Average 2012 CA impact fee for single-family residence was $31,100, 90% higher than next worst state. 265% higher than jurisdictions that levy such fees (many governments east of the Sierras do not). For apartments, fee averaged $18,800, 290% above average outside state. The fee is part of the purchase price, so buyer pays an annual property tax on the fee!
http://www.newgeography.com/content/003882-california-homes-require-real-reach
http://eyeonhousing.org/2014/01/home-building-impact-fees-state-averages/

“CAP AND TRADE” TAX:  CA has now instituted the highest “cap and trade” tax in the nation – indeed, the ONLY such U.S. tax. Even proponents concede that it will have zero impact on global warming.
http://tinyurl.com/WSJ-CA-cap-and-trade

SMALL BUSINESS TAX:  California has a nasty anti-small business $800 minimum corporate income tax, even if no profit is earned, and even for many nonprofits. Next highest state is Rhode Island at $500 (only for “C” corporations). 3rd is Delaware at $175. Most states are at zero.
http://tinyurl.com/CA-800-tax

Based just on GDP, CA ranks as the 6th largest economy in the world. But adjusted for population and cost of living, CA ranks lower than all but 13 U.S. States.
http://riderrants.blogspot.com/2016/07/updated-2015-figures-ca-per-capita-gdp.html

CORPORATE INCOME TAX:  CA 2016 corporate income tax rate (8.84%) is the highest west of Iowa (our economic competitors) except for Alaska.
http://www.taxfoundation.org/sites/taxfoundation.org/files/docs/CITmap.png  Ref. Table #15   – we have the 8th highest rate in the nation.

BUSINESS TAX CLIMATE: California’s 2016 “business tax climate” ranks 3rd worst in the nation – behind New York and anchor-clanker New Jersey. In addition, CA has a lock on the worst rank in the 2016 Small Business Tax Index – 7 TIMES worse than the best small business state (South Dakota).
http://taxfoundation.org/article/2015-state-business-tax-climate-index    http://sbecouncil.org/wp-content/uploads/2016/06/BTI2016.pdf

LEGAL ENVIRONMENT: The American Tort Reform Foundation in 2015 again ranks CA the “worst state judicial hellhole” in U.S. – the most anti-business.  The U.S. Chamber of Commerce ranks CA a bit better – “only” the 4th worst state in 2015 (unfortunately, sliding from 7th worst in 2008).
http://www.judicialhellholes.org/2015-2016/california/
http://www.instituteforlegalreform.com/states/california

FINES AND FEES:  CA driving tickets are incredibly high. Red-light camera ticket $490. Next highest state is $250. Most are around $100.
http://reason.org/blog/show/red-light-cameras-and-the-enigmatic

CA needlessly licenses more occupations than any state – 177. Second worst state is Connecticut at 155.  The average state is 92. But CA is “only” the 2nd worst licensing state for low income occupations.
http://cssrc.us/publications.aspx?id=7707  
http://bit.ly/1ff0OGu

WORKERS COMPENSATION INSURANCE: CA has the highest/worst state workers’ compensation rates in 2014, up from 3rd in 2012. CA rates 21.3% higher than 2nd highest state, 88% higher than median state. Yet we pay low benefits — much goes to lawyers.
http://riderrants.blogspot.com/2014/10/california-has-worst-workers.html

OVERALL TAXES:  Tax Foundation study ranks CA as tied for the 7th worst taxed state in 2016. But the CA taxes are the most progressive of all states, hammering the upper third of the populace. The top 1% pay 50% of all CA state income taxes.
http://taxfoundation.org/article/tax-freedom-day-2016-april-24

UNEMPLOYMENT: CA unemployment rate (Nov., 2016) has been improving. We are tied for ninth worst – 5.3%. National unemployment rate 4.6%.  Nat’l unemployment rate not including CA is 4.5%, making the CA unemployment rate 17.7% higher than the average of the other 49 states.
http://www.bls.gov/web/laus/laumstrk.htm    NOTE:  We were at 4.8% unemployed in Nov, 2006 – vs. national 4.6%.

But using the lagging yet arguably more accurate U-6 measure of unemployment (includes involuntary part-time workers), CA is the 4th worst – 11.6% vs. national 9.8%.  National U-6 not including CA is 9.6%, making CA’s U-6 21.4% higher than the average of the other 49 states.
http://www.bls.gov/lau/stalt.htm

EDUCATION:  CA public school teachers the 3rd highest paid in the nation.  CA students rank 48th in math achievement, 49th in reading.
http://www.lao.ca.gov/reports/2011/calfacts/calfacts_010511.aspx  (page 36) http://www.nea.org/assets/docs/NEA_Rankings_And_Estimates-2015-03-11a.pdf

California, a destitute state, still gives away community college education at fire sale prices. Our CC tuition and fees are the lowest in the nation.  How low?  Nationwide, the average community college tuition and fees are more than double our California CC’s.
http://trends.collegeboard.org/college-pricing/figures-tables/tuition-and-fees-sector-and-state-over-time

This ridiculously low tuition devalues education to students – often resulting in a 25+% drop rate for class completion.  In addition, because of grants and tax credits, up to 2/3 of California CC students pay no net tuition at all!
http://tinyurl.com/ygqz9ls

Complaints about increased UC student fees too often ignore key point — all poor and many middle class CA students don’t pay the UC “fees” (our state’s euphemism for tuition).  There are no fees for most California families with under $80K income. 55% of all undergraduate CA UC students pay zero tuition, and another 14% pay only partial tuition.
http://www.universityofcalifornia.edu/blueandgold/
http://tinyurl.com/UC-zero

WELFARE AND POVERTY: California’s real (“supplemental”) 2015 poverty rate (the new census bureau standard adjusted for the COL) is easily the worst in the nation at 20.6%.  We are 43.6% higher than the average for the other 49 states.
https://www.census.gov/content/dam/Census/library/publications/2016/demo/p60-258.pdf   Table 4 on page 9

California has 12% of the nation’s population, but 33% of the country’s TANF (“Temporary” Assistance for Needy Families) welfare recipients – more than the next 7 states combined.  Unlike other states, this “temporary” assistance becomes much more permanent in CA. http://www.utsandiego.com/news/2012/jul/28/welfare-capital-of-the-us/?print&page=all

California ranks 48th worst for credit card debt and 49th worst for percentage of home ownership.
http://riderrants.blogspot.com/2013/02/more-dismal-california-economic-rankings.html

GOVERNMENT INSOLVENCY: California has the 2nd lowest bond rating of any state – Basket case Illinois beat us out for the lowest spot. We didn’t improve our rating – Illinois just got worse.
http://www.pewtrusts.org/en/research-and-analysis/blogs/stateline/2014/06/09/sp-ratings-2014

Average California firefighter paid 60% more than paid firefighters in other 49 states. CA cops paid 56% more. CA 2011 median household income (including gov’t workers) is 13.4% above nat’l avg.
www.tinyurl.com/CA-ff-and-cop-pay
www.en.wikipedia.org/wiki/List_of_U.S._states_by_income

HOUSING COSTS:  Of 100 U.S. real estate markets, in 2013 CA contained by far the least affordable middle class housing market (San Francisco). PLUS the 2nd, 3rd, 5th, 6th and 7th. San Diego is #5 (with “middle class” affordable homes averaging 1,056 sq. ft.)
http://riderrants.blogspot.com/2013/10/the-us-least-affordable-housing-market

TRANSPORTATION COSTS: CA has 2nd highest annual cost for owning a car – $4,112. $370 higher than the other 49 states’ average.
http://tinyurl.com/zcame8j

WATER & ELECTRICITY COSTS: CA residential electricity costs an average of 42.3% more per kWh than the national average. CA commercial rates are 51.8% higher.  For industrial use, CA electricity is an astonishing 93.6% higher than the national average (July, 2016). The difference is growing between CA and the national average. NOTE: SDG&E is considerably higher.   https://www.eia.gov/electricity/monthly/epm_table_grapher.cfm?t=epmt_5_6_a

A 2015 U-T survey of home water bills for the 30 largest U.S. cities found that for 200 gallons a day usage, San Diego has the 3rd highest cost – 73.7% higher than the median city surveyed.  At 600 gal/day, San Diego was again 3rd highest – 81.7% higher than the median city.
http://www.sandiegouniontribune.com/news/2015/jul/27/drought-water-prices-rise/

BUSINESS FLIGHT:  In 2012, our supply of California businesses shrunk 5.2%. In ONE year. NOTE: That’s a NET figure – 5.2% fewer businesses in CA in 2012 than were here in 2011. Indeed, in 2012, CA lost businesses at a 67.7% higher rate than the 2nd worst state!
http://riderrants.blogspot.com/2013/07/in-2012-ca-lost-businesses-at-677.html

The top U.S. CEO’s surveyed rank California “the worst state in which to do business” for the 12th straight year (May, 2016)
http://chiefexecutive.net/california/

From 2007 through 2010, 10,763 manufacturing facilities were built or expanded across the country — but only 176 of those were in CA. So with roughly 12% of the nation’s population, CA got 1.6% of the built or expanded manufacturing facilities. Stated differently, adjusted for population, the other 49 states averaged 8.4 times more manufacturing growth than did California.
http://www.cmta.net/20110303mfgFacilities07to10.pdf — prepared by California Manufacturers and Technology Association

OUT-MIGRATION:  California is now ranked as the worst state to retire in. Easily the lowest percentage of people over age 65. We “beat” ’em all – NY, NJ, etc.
https://www.fidelity.com/insights/retirement/10-worst-states-to-retire-2014
http://riderrants.blogspot.com/2015/12/kiplinger-ranks-california-as-worst.html

The median Texas household income is 13.5% less than CA. But adjusted for COL, TX 2015 median household income is 29.3% more than CA.
https://www.census.gov/content/dam/Census/library/publications/2016/demo/acsbr15-02.pdf
https://www.missourieconomy.org/indicators/cost_of_living/index.st

Consider California’s net domestic migration (migration between states).  From 1992 through mid-2015, California lost a NET 3.9 million people to other states.  Net departures slowed in 2008 only because people couldn’t sell their homes.  But more people still leave each year — in 2015 we lost 77,219. Again, note that these are NET losses.  Sadly, our policies have split up many California families.
https://twitter.com/SenTedCruz/status/464827967747526656/photo/1
http://riderrants.blogspot.com/2015/04/were-california-real-estate-prices.html

It’s likely that it’s not the welfare kings and queens departing.  They are primarily the young, the educated, the productive, the entrepreneurial, the ambitious, the wealthy (such as Tiger Woods) – and retirees seeking to make their nest-eggs provide more bang for the buck.

*   *   *

Richard Rider is the chairman of San Diego Tax Fighters, a grassroots pro-taxpayer group. Rider successfully sued the county of San Diego (Rider vs. County of San Diego) to force a rollback of an illegal 1/2-cent jails sales tax, a precedent that saved California taxpayers over 14 billion dollars, including $3.5 billion for San Diego taxpayers. He has written ballot arguments against dozens of county and state tax increase initiatives and in 2009 was named the Howard Jarvis Taxpayers Association’s “California Tax Fighter of the Year.” Rider updates this compilation of statistics on California every month; they are regularly updated here.

6 replies
  1. S Moderation Douglas
    S Moderation Douglas says:

    Wow!! Debbie Downer… redux

    From the Tax Foundation… “State-local tax burdens are very close to one another and slight changes in taxes or income can translate to seemingly dramatic shifts in rank. For example, Delaware (16th) and Colorado (35th) only differ in burden by just over one percentage point.”

    So California is ranked 4th in state-local tax burdens. That’s just over one percentage point higher than the national average. (11% of income vs. 9.9% of income)

    One more time, CA has the highest income and sales tax “rates”, but not the highest taxes per capita due to other factors, like CA has higher deductibles and exemptions, and does not have sales tax on groceries or services, as some states do.

    If you just look at the “averages” as per the Tax Foundation, the “average” wage earner in California ($55,000 a year) pays about $550 a year more than the national “average” in state and local taxes. Would you seriously move to another state to save $550 a year?

    Before you call U-HAUL, check ITEP “Who Pays” 5th edition
    If you are in the middle quintile of earners ($38,000 – $61,000 a year) you probably pay LESS than the national average already. Because of California’s progressive taxes, as Mr. Ryder says. True, if you are in the top five percent of earners, you will pay more in California than in most any other state…

    But, that means you earn more than $220,000 a year, and, you get to live in California. That’s way better than a poke in the eye.

    The grass is always greener on the other side of the fence.

    Or, as Erma Bombeck says: The Grass Is Always Greener Over the Septic Tank

    Reply
    • blind squirrel
      blind squirrel says:

      Yes, we Californians do love our state. For many/most of us, our beautiful weather, coastline, lifestyle and family roots keep us here. But, maintaining a productive, and even beautiful business environment, is also important to our economy (e.g., jobs). I think resting on our laurels (our weather) is a cop out. Does it not worry you when CEO’s rate California as the worst state in which to do business? Does the this statistic not speak volumes?: “From 2007 through 2010, 10,763 manufacturing facilities were built or expanded across the country — but only 176 of those were in CA.”

      Consider this: Austin Texas is now the Silicon Valley of Texas. It is growing with support from the biggest names in technology (e.g., 3M, Apple Inc., Hewlett-Packard, Google, Facebook, AMD, Applied Materials, Cirrus Logic, Cisco Systems, eBay/PayPal, Bioware, Blizzard Entertainment, Hoover’s, Intel Corporation, National Instruments, Samsung Group, Silicon Laboratories, Oracle Corporation (www.austinrelocationguide.com/Major-Employers-and-Top-Companies-in-Austin/)

      These marquis California tech companies are expanding…. in TEXAS instead of California. Our best businesses are voting with their feet, taking some of the best jobs any community could want and moving them to Texas. Nothing makes Texas happier than for California to maintain its hostile business environment.

      We rest on our laurels at our own risk.

      3M, Apple Inc., Hewlett-Packard, Google, Facebook, AMD, Applied Materials, Cirrus Logic, Cisco Systems, eBay/PayPal, Bioware, Blizzard Entertainment, Hoover’s, Intel Corporation, National Instruments, Samsung Group, Silicon Laboratories, Oracle Corporation, Hostgator, and United Devices as some of the …

      Reply
      • S Moderation Douglas
        S Moderation Douglas says:

        “We rest on our laurels at our own risk.”

        I don’t disagree. Hence the name “Moderation”. However…

        Misleading information like in this article is not helping. (Intentionally misleading, in my opinion.)

        People reading this without critical thinking or without verifying facts come to the wrong conclusions.

        Like it or not, California is one of the most progressively taxed states. The wealthiest pay a much higher percentage of their income here than in any other state (although close in a few cases.) But reading this article, the “middle class” taxpayer thinks he is getting a raw deal. If, acting on that, he moves to another state, he will, in many cases, end up paying MORE tax. He might well pay much less for housing (and may find the average income in his new state is lower.) He could get roughly the same effect by moving from the Bay area to Adelanto.
        ……………………………………
        ” Does the this statistic not speak volumes?: “From 2007 through 2010, 10,763 manufacturing facilities were built or expanded across the country — but only 176 of those were in CA.”

        Not really. Manufacturing is about 8.8% of American jobs (8.03% in California) and being continually reduced by foreign competition and automation. And more automation… that’s not necessarily a bad thing.

        In many ways, California may be a victim of it’s own success. Population has doubled since I moved here (1967) and housing prices in the Bay Area are prohibitive for most workers. Why? because other workers are willing and able to pay.
        ……………………………………..
        For the record, Richard says (often)…
        “California has 12% of the nation’s population, but 33% of the country’s TANF (“Temporary” Assistance for Needy Families) welfare recipients – more than the next 7 states combined. ”

        And that’s the truth… Thank you Meg Whitman!

        Moderation likes to rebut (whenever possible)… TANF is one relatively small (about $4 billion) program in California’s “welfare” budget (about $80 billion state and local). Yes, according to the US Census bureau, California has higher than average welfare costs: about 12% of the nation’s population and about 14% of the nations TOTAL welfare expenditures. (Last I checked, only seven states had higher per capita welfare costs than California)

        But that don’t have quite the zing of “12% and33%”.

        Sure, we could do better. And we could do much worse.

        Reply
  2. S Moderation Douglas
    S Moderation Douglas says:

    Would I be violating the commenting rules if I said Richard Rider is a old curmudgeon?
    That’s not such a bad thing. I am a (slightly less old) curmudgeon myself.

    I believe I’ve told him before, like I often tell Tough Love, You may well be shooting yourself in the proverbial foot when you make such exaggerated statements.

    Of course I would say the same thing to Ed Ring. And Will Swaim. Robert Fellner. etc.

    Hey, maybe it’s me !!!

    Reply
  3. suzylnn
    suzylnn says:

    POLICIES!!! There are no consequences for criminals in California and practically zero law enforcement. Felonies are a mere slap on the wrist nowadays. Drugs such as heroin & meth are misdemeanor’s in California! Some of the most brutal criminals are made celebrities in this state. Example: Manson is still alive and considered very news worthy!!! He should have been put to death in the 1970’s. Don’t be fooled. There is NO DEATH PENALTY in Cali. But a so-called death sentence never to be realized nor enforced. Where there are no serious consequences for crime and sentence is not made speedily. You reap what you sow and California law makers are sowing only to reap cold hard cash. Not to mention this is a celebrity state ruled by money & greed. So this is what we live with in California. Horrific boldness in the public. No fear of the law because there are no consequences. People fighting, screaming, standing up for there rights, chaos, rudeness, HATE crimes, rape, murderers, drug/ sex traffickers, and it’s going to STAY this way.

    Reply

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