Is California really a high-tax state? New findings question that claim

Maybe California is not such a high tax state after all — at least for lower income families.

“For families of modest means, California is not a high tax state,” says a new study from the Institute on Taxation and Economic Policy, a liberal Washington research group.

The high tax state moniker has clung to California for some time. Its top income tax rate and gasoline tax are routinely among the nation’s highest each year recently, and officials in low-tax Texas and Florida are constantly blasting California for its tax burden.

For families with incomes of $145,900 or less, though, the tax burden is close to or above the national average. And for the wealthiest people, California is clearly a high tax state.

Gov. Gavin Newsom has countered that it’s wrong to paint California as a high tax state, noting that middle and lower class residents pay the same or less than Texans and people in Florida. Last year, he said California’s tax rates ”are lower than the state of Texas’’ though adding that California’s very wealthy do pay higher rates than in other states.

ITEP, which conducted the new study, researched the impact of state and local taxes on families across the income spectrum in every state. It found that very few states can “neatly be categorized as low tax or high tax for families across the board.”

“The highest earners usually pay higher taxes in California than elsewhere,” wrote Eli Byerly-Duke, ITEP state policy analyst and Carl Davis, ITEP research director.

For families in the bottom 80% of the income scale–those with annual incomes of $145,900 or less–overall tax rates are within a percentage point of the national average.

But as incomes grow, so does the tax burden.

The next 15% of income earners in California, or families with incomes between $145,900 to $352,300, will pay 10.8% of their income in taxes this year.

The U.S. average is 9.5%. People can expect to pay less if they’re residents of Texas, where the taxes are 7.2% of income, and Florida, 6.4%.

The difference is more stark among the top 1%, or those in California earning more than $862,100.

The U.S. average is 7.2%. The rich Californians pay 12% of their income. That’s partly because the top income tax rate in California for millionaires is 13.3%.

In Texas, the top 1% pay an average of 4.6% in taxes, while people in Florida pay 2.7%. Neither has a state income tax.

The news for Californians gets better for people making far less than the very rich. ”California has lower taxes for its bottom 40% of earners than either Texas or Florida,” the study says.

For lower and middle class wage earners, the biggest category of state and local taxes are consumption taxes, such as state and local sales taxes, and then property tax on their homes and cars. In California, a smaller share of income goes to those taxes, as the income tax makes up most of their overall state and local payments.

The middle 20%, or those earning $48,800 to $86,100, pay 10.4% in taxes, roughly the same as the national average. That’s still above Texas’ 9.9% and Florida’s 9.5%.

The bottom 20% of income earners, those making less than $25,200, pay 11.7% in taxes in California, slightly higher than the U.S. average, but well below Texas’ 12.8% and Florida’s 13.2%.

WalletHub had similar findings last month. It reported that the annual state and local taxes for a median California household cost $9,612.

A Californian’s tax burden ranks ninth highest in the country. Texas is Texas’ 32nd ranking and Florida is 45th. Tax burden is the property, individual income and sales and excise tax as a share of personal income.