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

April 2014 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 $48,942 for people filing as individuals. 10.3% started at $1 million. Now our retroactive (to 1/1/2012) “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 21% higher than 2nd place Hawaii, 34% higher than Oregon, 47.8% higher than the next 2 states, and a heck of a lot higher than all the rest – including 7 states with zero state income tax. CA is so bad, we also have the 2nd highest state income tax bracket. AND the 3rd. Plus the 5th and 7th.
http://taxfoundation.org/sites/taxfoundation.org/files/docs/ff2013.pdf, Ref. Table 12


SALES TAX:  CA has the highest state sales tax rate in the nation. 7.5% (does not include local sales taxes).

GAS TAX:  CA has the nation’s highest gas tax at 71.6 cents/gallon (October, 2013). National average is 49.5 cents.
(CA also has the nation’s 3rd highest diesel tax – 76.2 cents/gallon. National average 54.8 cents)

PROPERTY TAX:  California in 2010 ranked 19th highest in per capita property taxes (including commercial) – the only major tax where we are not in the worst ten states. But the median CA property tax per owner-occupied home was the 7th highest in the nation in 2009.
http://www.taxfoundation.org/taxdata/show/1913.html (2009 latest year available)

“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!

“CAP AND TRADE” TAX:  CA has now instituted the highest “cap and trade” tax in the nation – indeed, the ONLY such U.S. tax. One study estimates the annual cost at $3,857 per household by 2020. Even proponents concede that it will have zero impact on global warming.

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 Oregon at $150. A few others under $100, with most at zero.

California small businesses failed in 2011 at a rate 69% higher than the national average — the worst state in the nation.
http://money.cnn.com/2011/05/19/smallbusiness/small_business_state_failure_rates/index.htm (based on Dunn & Bradstreet study)

CORPORATE INCOME TAX:  CA corporate income tax rate (8.84%) is the highest west of the Mississippi (our economic competitors) except for Alaska.
Ref. Table #1 – we are 5th highest in nation in per capita corporate tax collections.

BUSINESS TAX CLIMATE:  California’s 2013 “business tax climate” ranks 3rd worst in the nation – behind New Jersey and anchor-clanker New York state.

LEGAL ENVIRONMENT:  The American Tort Reform Association ranks CA the “worst judicial hellhole” in U.S. for 2nd year in a row – most anti-business. The U.S. Chamber of Commerce ranks CA higher – “only” the 4th worst state (unfortunately, sliding from 7th worst in 2008).

FINES AND FEES:  CA tickets are incredibly high. Red-light camera ticket $490. Next highest state is $250. Most are around $100.

CA needlessly licenses more occupations than any state – 177. Second worst state is Connecticut at 155. The average for the states is 92. But CA is “only” the 2nd worst licensing state for low income occupations.

CA has the 3rd highest state workers compensation rates, up from 5th in 2010. CA had a 3.4% rate increase in 2013.

OVERALL TAXES:  Tax Foundation study ranks CA as the 4th worst taxed state. But if counting ONLY in-state and local taxes, we are arguably the 2nd highest.

UNEMPLOYMENT:  CA is tied for the 4th worst state unemployment rate (February, 2014) – 8.0%.  National unemployment rate 6.7%.  National unemployment rate not including CA is 6.5%, making the CA unemployment rate 22.6% higher than the average of the other 49 states (sadly, one of the better performances we’ve managed in several years).

Using the average 2013 U-6 measure of unemployment (includes involuntary part-time workers), CA is the 2nd worst (after Nevada) at 17.3% vs. national 13.8%.  National U-6 not including CA is 13.3%, making CA’s U-6 29.9% higher than the average of the other 49 states.

EDUCATION:  CA public school teachers the 4th 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

California, a destitute state, still gives away community college education at fire sale prices. Our community college tuition is the lowest in the nation. How low? Nationwide, the average community college tuition is more than double our California community colleges.

This ridiculously low tuition devalues education to students – often resulting in a 25+% drop rate for class completion. In addition, up to 2/3 of California CC students pay no net tuition at all!

Complaints about increased UC student fees too often ignore one crucial point — all poor and many middle class students don’t pay the “fees” (our state’s euphemism for tuition). There are no fees for most California families with under $80K income.

WELFARE AND POVERTY:  1 in 5 in Los Angeles County receiving public aid.

California’s real poverty rate (the new census bureau standard) is by far the worst in the nation at 23.8%. We are 48.8% higher than the average for the other 49 states. Indeed, the CA poverty rate is 20.2% higher than 2nd place Nevada.
http://www.census.gov/prod/2013pubs/p60-247.pdf, page 13

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.

California ranks 48th worst for credit card debt and 49th worst for percentage of home ownership.

GOVERNMENT INSOLVENCY:  California now has the 2nd lowest bond rating of any state – Basket case Illinois recently beat us out for the lowest spot. We didn’t improve our rating – Illinois just got worse.

Average California firefighter paid 60% more than ff’s in other 49 states. CA cops paid 56% more.

HOUSING COSTS:  Of 100 U.S. real estate markets, CA contains by far the least affordable middle class housing market (San Francisco). PLUS the 2nd, 3rd, 5th, 6th and 7th. San Diego is #5 (w/homes avg. 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 – $3,966. $765 higher than the national average.

WATER & ELECTRICITY COSTS:  California residential electricity costs an average of 27.6% more per kWh than the national average. CA commercial rates are 44.4% higher. For industrial use, CA electricity is 74.4% higher than the national average (October, 2013). NOTE: SDG&E is even higher than the CA average! http://www.eia.gov/electricity/monthly/epm_table_grapher.cfm?t=epmt_5_06_a

A 2011 survey of home water bills for the 20 largest U.S. cities found that for 200 gallons a day usage, San Diego was the highest cost. At 400 gal/day, San Diego was third highest.

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!

736 top U.S. CEO’s surveyed rank California “the worst state in which to do business” for the 9th straight year (May, 2013). 24/7 Wall St. ranks CA the “worst run state” for 3rd year.

From 2007 through 2010, 10,763 industrial 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 industrial facilities. Stated differently, adjusted for population, the other 49 states averaged 8.4 times more manufacturing growth than did California.
(California Manufacturers and Technology Association podcast)

OUT-MIGRATION:  California is now ranked as the 2nd worst state to retire in. Only basket-case Illinois is worse. We “beat” NY, RI and NJ.

The median Texas household income is 18.1% less than CA. But adjusted for COL, CA median household income is 16.1% less than TX.

Consider California’s net domestic migration (migration between states). From 2000 through 2009, California lost a NET 1.5 million people. Net departures slowed in 2008 only because people couldn’t sell their homes. But more people still leave each year — in 2011 and again in 2012, we lost about 100,000 net people to domestic out-migration. Again, note that this is NET loss.

They are primarily the young, the educated, the productive, the ambitious, the wealthy – 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.

7 replies
  1. Avatar
    Gary Schumacher says:

    Thank you. You made my day——–miserable. You might want to e-mail a list of names and addresses of our representatives in Sacramento so that we can communicate our displeasure with their actions.

  2. Avatar
    joan wood says:

    I live in San Francisco which is my second home as I own and vote from my farm in Sutter County. Frankly I don’t know which has a more corrupt County government. A guy running for Auditor in Sutter had his license suspended for 17 years for malfeasance in another county as its Auditor andSutter’s recently retired/forced to resign D.A. has been cheating on his wife with a prostitute for several years also implicated in arson of her residence. Prior, the D.A. went after our current Auditor for trying to tell the voters about Sutter’s outrageous pension system which has put the County in debt for $52 million and climbing. The poor Auditor has had to pay his own legal expenses for years until finally completely exonerated. J. Wood

  3. Avatar
    Lawton Pelfrey says:

    We can also blame Arnold for some of this. He was a liberal and found ways to tax us to death. But nearly all of this is due to Democrats in charge. We must support those who are trying to turn California back around and by support that means sending money. It is the only way.

  4. Avatar
    Adriana Brady says:

    Actually, Arnold Schwarzzenegger was the ONLY would-be politician in California’s recent history to attempt to stop the downward slide. He attempted to effect change in areas that need it, in order to avoid another Detroit. He tried to change teacher tenure, pensions and other sky-rocketing benefits. We cannot continue to sustain these types of pensions, retirement benefits, etc…. not just for teachers but also for police, fire and other positions that, although very needed and very noble, do not warrant lifetime benefits that will render our state bankrupt! California teachers are some of the highest paid in the nation and yet we rank 48th in education! That is unacceptable and unsustainable!!!

  5. Avatar
    Jeffery Hall says:

    J. Wood, you are absolutely correct about Sutter County. The situation you describe has been swept under the rug for years. I’m from Nevada County, California (Smartsville, CA; Penn Valley, CA) and am aware of what you write. It is all true. Corruption at it’s worst. May as well move to Chicago.

    On the other hand… the people of Sutter County are wonderful, hardworking, genuine and generous. Go Honkers!

  6. Avatar
    Pete - a native Californian says:

    I moved from California to southwest Washington (state) in 2012. The corresponded with my retirement as I wound up the last of my home business. I don’t regret the move for one second. My overhead has been cut substantially.

    Housing — while property taxes are higher in WA than in Prop 13 suppressed CA, the relatively more affordable housing cost allowed me to pay about the same as my Bay Area home sold for — except I moved into a brand new high quality home after selling a 50 year old home that we’d had to remodel and upgrade several times (we lived there for 30 years) and it was in need of additional upgrades and systems repairs. I pay about $1000 more per year in property taxes.

    Income tax — Washington has no income tax. With California’s high taxes — and lack of lower “capital gains” rates — I save around $5000 to $6000 per year on income taxes. (Having saved for years and years, now retired, we live on our investment income in addition to smallish pension from one employer and Social Security.)

    Health care. For most of the previous 30 years, I was a member of Kaiser Permanente in the Bay Area. I was satisfied with their services and costs. SW Washington is in the “Oregon-Washington” zone for Kaiser Permanente, and we were able to re-establish our coverage with Kaiser. In general, the service and quality is much the same as I experienced in the Bay Area — but there are fewer crowds due to the lower population.

    Other overhead. Sales taxes in Washington are only slightly lower than CA — but we’re about 15 minutes from large shopping centers in Oregon where there is no sales tax. (My real estate agent said he follows the $100 rule — if he’s going to spend more than $100 on items subject to sales tax, he buys in Oregon.) For us, we don’t have many needs where sales taxes come into play. Automobile taxes are WAY cheaper than in CA. Registration fees for my small RV were $625/year in CA — in WA they’re $125. Our car was over $200 in CA, in WA it was $50. The biggest shock was the electricity rates. We were often above the 200% or even the 300% “above baseline” rate on our electric bill in CA. Often, we paid a marginal rate of 36 or even 48 cents per KWH. In Washington, the electricity rate is 8-1/3 cents per KWH in any quantity. I’m saving $100 to $200 per month on electricity alone!

    Weather. California has the edge… somewhat. It really depends on where you live(d) in CA. I didn’t much care for the weather when I spent about 8 years living in the Central Valley (Marysville, Chico, and Sacramento) — but I enjoyed the East Bay Area weather where I was born and where I spent the last 30 years… But SW Washington isn’t that bad. Colder in the winter, with occasional snow. Summer is a little warmer than the “close in” East Bay (but about the same as Concord or Danville). There’s about twice the rainfall as the Bay Area … strangely, most rainfall is at night — so it interferes less with one’s live than the weather reports might suggest. Even the worst rainy days have “sun breaks” where the sun shines through the cloudy sky. (Never saw that in the Bay Area.) And, there’s no talk of “drought” here.

    It makes a lot of sense for a middle class retiree to look elsewhere — and Washington, while not the least expensive state, still offers substantial savings vs. California (when you’re living in the most expensive state, everywhere else is cheaper).

    It saddens me that I had to break the multi-generation chain of California residence established by both my and my wife’s families — with roots dating back to before 1900… but we’re glad that we’re no longer paying a premium for living in California.

    PS. They complain about traffic here …. but they have NO IDEA what bad traffic really is. (I commuted 55 miles over the Nimitz, Dumbarton bridge, and Highway 101 to Mountain View for several years. On average, more than 3 hours per day in heavy traffic.)

  7. Avatar
    Roger Krimsky says:

    Mr. Lawton Pelfrey has no idea of the comment he made. Your quick action to blame the least political and hardest working most honorable governor we have had show you follow the lead of the Great Blamer, himself, Barrick Hussein Obama. Did you see Arnie work relentlessly to try and balance our budget and did he ever receive one dime for all he did? Do you remember he did not take any wages or any money for travel, food, etc? How can you equate Arnie and label him as a liberal? Mr. Pelfrey, you are a fool, a total fool to ever make that comment. But, that is what a person who blames does. Let me guess, you vote Democratic, possibly on some sort of subsidy and are a vegetarian with a cat.

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