Kiplinger: CA taxes highest — and state hostile to retirees, too

Kiplinger: CA taxes highest — and state hostile to retirees, too

kipOver the years, when I’ve reported that the nation’s CEOs continue to rank California as the most anti-business state in the country, I’ve gotten some blowback in emails and comments that question whether the ranking was manipulated. This is goofy paranoia — the suggestion by CA Dems and labor types that national surveys are manipulated by … someone … to make the Golden State look bad.

Now we have a new independent analysis that makes California look horrible whose sponsor can have its motives impugned. It’s Kiplinger, the business website that has millions of followers from its pre-Internet days as publisher of smart, common-sense newsletters and magazines on investments and personal finance.

Kiplinger’s verdict: CA is worst of all when it comes to tax burdens on individuals:

State income tax: 1%-13.3%

State sales tax: 7.5%

Gas taxes and fees: $0.50 per gallon (National average is $0.31)

The Golden State is home to movie stars, beautiful beaches, Silicon Valley… and the highest income tax rates in the U.S. Rates range from 1% on taxable income of up to $7,582 for individuals ($15,164 for married joint filers) to 13.3% for individuals or married couples with taxable income of more than $1 million.

California’s state sales tax increased from 7.25% to 7.5% on Jan. 1, 2013. (The rate hike is scheduled to expire at the end of 2016.) Then there are local sales taxes in cities and counties with special taxing districts; in some cities, the combined rate is 10%. Food and prescription drugs are exempt.

California also imposes the highest gas taxes in the U.S as well as an annual vehicle license fee (VLF) of 0.65% of the purchase price of the vehicle (or the value when it was acquired) that’s reduced each year for the first 11 years of car ownership. For example, the VLF on a two-year-old vehicle purchased for $25,000 would be $147.

There is a bit of (relative) relief: Californians pay lower property taxes than residents in other high-tax states. Under the homestead program, the first $7,000 of the full value of a homeowner’s dwelling is exempt. But real estate is expensive. The median property tax on the state’s median home value of $384,200 is $2,839, according to the Tax Foundation.

California also hostile to retirees

Kiplinger'sIn what paranoids will see as a bonus bashing, Kiplinger’s website also features an analysis that concludes CA is horrible for retirees. It doesn’t break down the 1 to 10 spots, but it says the Golden State is among the 10 worst states for people in retirement.

The Bottom Line: NOT TAX-FRIENDLY

One of Kiplinger’s top ten least tax-friendly states for retirees, the Golden State is a retiree’s tax nightmare. Although Social Security benefits are exempt, all other forms  of retirement income are fully taxed.

California residents pay the highest income taxes in the U.S. The statewide sales tax is high, too. Real estate is assessed at 100% of market value.

State Sales Tax

The state sales tax increased to 7.5%, from 7.25%, as of January 2013. (The rate hike is temporary and is set to expire at the end of 2016.) Rates are higher in cities and counties with special taxing districts; with the addition of local taxes, the total can reach 10% in some cities. (Food and prescription drugs are exempt.)

Income Tax Range

Low: 1% (on up to $14,910 of taxableincome for married joint filers and up to $7,455 for those filing individually)

High: 13.3% (on more than $1 million for married joint filers and for those filing individually)

Social Security

Benefits are not taxed.

Exemptions for Other Retirement Income

Retirement benefits are exempt. All private, local, state and federal pensions are fully taxed. There is a 2.5% state penalty on early distributions from retirement plans, annuities and IRAs.

Property Taxes

Property is assessed at 100% of market value. The maximum amount of tax on real estate is limited to 1% of assessed value. Note, though, that property is generally only reappraised when it changes ownership or has new construction (a property’s assessed value is typically equal to its purchase price adjusted upward each year by 2%). Under the homestead program, the first $7,000 of the full value of a homeowner’s dwelling is exempt. Median property tax on the state’s median home value of $384,200 is $2,839, according to the Tax Foundation.

Tax breaks for seniors

The Homeowner Assistance program, which provided property-tax relief to people who were blind, disabled or at least 62 years old and met certain minimum annual income thresholds, has been halted and has not been funded by the state in recent years.

Inheritance and Estate Taxes

There is no inheritance tax or estate tax.

So when it comes to taxes, it’s bad to be an earner in California. And it’s bad to retire here. But at least residents can rest comfortably knowing that public employees don’t have to fret about how they’ll make ends meet in their retirement.

40 comments

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  1. Ronald Stein
    Ronald Stein 27 August, 2014, 08:08

    California also hostile to the financially challenged as the public is getting to absorb the ever increasing costs associated with their continuous support of AB32 since 2006, for products and services that are the basis of our lifestyle and economy.

    California’s Global Warming Initiative AB32 was passed in 2006 without a financial impact projection on its projected costs to the California economy. In 2010, following the recession, Prop 23 proposed delaying its implementation until the California economy could “afford” it, but it was soundly defeated in 2010. Cost of energy in California continues to rise and severely impacting the financially challenged that can least afford more expense to tread water. In 2015 the cost of implementation of other pieces of the law supported by the people is about to hit the pocket books of all Californians.

    EVERY CALIFORNIA INDUSTRY is dependent on energy from the petrochemical sector as well as the by-products from oil for their existence to provide products or services that support our lifestyle, standard of living, and our economy that we have become accustomed.

    Extra costs resulting from government actions on businesses are a slight inconvenience to those making the big bucks. Those behind the over regulations, over taxation, and uncontrollable “fees” on businesses are mostly the highly compensated, and most with sweet defined retirement benefit packages waiting for them upon retirement, i.e., those that CAN afford the higher costs that trickle down to all citizens for products and services.

    Thus, the polluters i.e., the manufacturers as well as the users of the products or services manufactured have been and will continue to pay for the lifestyle that supports our economy. Those polluters are NOT just the manufacturers providing the products and services to the economy, but the entire population that is guilty by association to the pollution as they are the users of the manufactured products and services.

    Those that earn less than $20 per hour, which includes virtually all those in the food and hospitality industries, are the ones that can least afford higher costs for power, transportation fuels, and food. There is minimal impact to those that can afford the results of our relentless business unfriendly efforts, but little hope for the financially challenged that can barely exist at today’s cost of living.

    Reply this comment
  2. Queeg
    Queeg 27 August, 2014, 10:10

    The pity is the working poor hold up this State, but they get cleaned out by gas prices/taxes as well as globalists fixing labor rates across the service industry board and owning the big box retail sector…..hardly low prices anymore.

    The middle class gets by living on negative cash flow, but swim in credit card debt with no reserves for emergencies or retirement contributions………they get ripped on housing prices too, but they do own something, at least…..for awhile!

    Busy busy busy…..when is the weekend? For the working poor, A Friday night is tacos and Old Milwaukee; the middle class supples on CVS jug wine, Walmart cocktail crackers……American faux brie.

    Then the politician’s savior of us all…Redistribution, alas, is too too inefficient only building power groups, for example, the purple shirts protect their extortion/funding of businesses through enviro, zoning, pitt bull fee grinding attorneys, pseudo health/welfare regulations. Such unmerciful, goose stepping groups are no citizen’s friend, but fool enviros gush altruistically, or something perverted like that.

    For you doubters, search the web for the recent article on tech service workers in Northern California scraping to get by……chilling….are you next? You betcha….eventually, those in a heavy emphasis service economy eat their own…..pass the French mustard-

    Reply this comment
  3. fletch92131
    fletch92131 27 August, 2014, 10:54

    When Reason Foundation stepped-up to the plate and started the Saving California program, using Carl DeMaio, ex-San Diego councilmember and Mayoral Candidate, and now Congressional Candidate as their spokesperson, and I started the blog on saving the state that I live in: http://bit.ly/10rkHTM

    Reply this comment
  4. S Moderation Douglas
    S Moderation Douglas 27 August, 2014, 12:07

    Very interesting.

    Did you know? Kiplinger is comparing tax rates.

    California has one of the highest sales tax rates, but NOT the highest sales tax burden. Because some states tax groceries, etc.

    California has some of the highest income tax rates, but not the highest tax burden. Because of the deductions and exclusions.

    In total state tax “burdens”, California is actually fourth, not first.

    Big whoop?

    California is a very “progressive” taxation state. (that word may be loaded, but it has several meanings of course)

    Meaning: if you live in California, AND you are in the highest quintile (over $96,000 income) your tax burden higher will be higher than the national average for your income group.

    If you are unfortunate enough to be in the top 1%, ($466,000 income), MUCH higher. The average state plus local tax burden for these folks in California is about 8.8%, US average for this group is 5.6%. In Texas, it would be 3.2%, and Wyoming would be lowest with 1.6%. (Wyoming actually appears to be lower than average for EVERY income group.)

    Texas: If you live in Texas and your income is $52,000 a year, or less, your tax burden will be HIGHER than the same group in California. Median household income in Texas is about $58,000, for what it’s worth.

    (data from THE INSTITUTE ON TAXATION & ECONOMIC POLICY)

    “But at least residents can rest comfortably knowing that public employees don’t have to fret about how they’ll make ends meet in their retirement.”

    See? I TOLD you the glass was at least half full!!!

    Reply this comment
    • T Mind of Ted Your God
      T Mind of Ted Your God 28 August, 2014, 07:55

      WELL said S Mod— bright post as always!

      Reply this comment
      • S Moderation Douglas
        S Moderation Douglas 30 August, 2014, 09:43

        On another website, I answered a question with a very short (but complete) reply. I got the error message “Your response is to short, please go back and try again.”

        Not a comment I usually hear.

        We try.

        Keep up the good work, Ted.

        Reply this comment
    • Jim Caruth
      Jim Caruth 28 August, 2014, 20:13

      Sorry, S MOderation, the ITEP study is complete garbage. I read the entire thing. The problem with the ITEP study is that its authors do not reveal the methodology of how they arrive at their conclusions.

      ITEP covers its analysis of California’s various taxes on page 34 of their study. Let’s look at the “sales and excise taxes” as an example. According to ITEP, the CA sales and excise taxes take the following amount of money (i.e., “tax burden”) from each of the quintiles as follows:

      lowest quintile 6.5%
      second quintile 5.6%
      middle quintile 4.3%
      fourth quintile 3.4%

      ITEP never reveals how they arrive at these figures. How did they calculate that middle quintile pays 4.3% of its income in sales and excise taxes? They don’t say.

      Then turn to page 112, where they cover Texas. Texas has a lower sales tax rate than California, and yet the figures that ITEP shows for sales and excise tax burden in Texas are as follows:

      lowest quintile 8.5%
      second quintile 7.6%
      middle quintile 6.1%
      fourth quintile 4.7%

      Nowhere in their documentation does ITEP explain how they concluded that people in a state with a higher sales tax rate (CA) would pay less in sales tax than residents of Texas. Both states tax the same types of items, and groceries are exempt from sales tax in both states. In other words, they claim that Californians have a lower sales tax burden, while having a higher tax rate, than people in Texas, but they never explain how they arrived at this amazing conclusion.

      Here are the actual sales tax rates allowed in the two states:
      California: 6.50% state tax, plus 1% county tax, plus higher rates for cities and counties with special tax districts; the maximum total sales tax is currently 9.75%;
      Texas: 6.25% state tax, plus local taxes can add up to a total of 8.25% maximum allowed by law.

      see http://www.tax-rates.org for state sales tax rates.

      When I moved from CA to TX in 1990, I did a close calculation of my taxes, (gasoline, sales, property, income, etc), and I concluded that I paid at least $400.00 / month less in taxes by moving. Since then, taxes have gone up, up, and up in California, and I would venture that I save between $500 – $600 a month in taxes by not living in California.

      As far as I can tell, the ITEP paper (http://www.itep.org/pdf/whopaysreport.pdf) is a leftist ideological jab at all of the states that don’t have state income taxes. The states that have high income taxes all fare well in ITEP’s view, while the ones that don’t have state income taxes are skewered. ITEP never does clarify its strange calculation of tax burden.

      Other assessments have reach different conclusions from ITEP’s study. I think you may want to look elsewhere.

      Reply this comment
      • S Moderation Douglas
        S Moderation Douglas 29 August, 2014, 20:08

        I don’t know about their methodology,

        Here is a similar survey of major cities which shows a substantial difference in sales tax burdens in every income category. This study says their data comes from BLS Consumer Expenditure Survey.

        http://cfo.dc.gov/node/768732

        It seems to corroborate ITEP sales tax trends, much higher in Texas.

        I had read a couple of articles which said basically the same thing. Even though Texas is a low tax state overall, the wealthy pay MUCH less. The difference must come from somewhere.

        On the other hand, this (DC) study does show higher taxes overall in California (property tax, perhaps, the main factor.)

        Interesting, this (DC) study is for a hypothetical family of three, and calculates NO income tax burden for up to $50,000 income. (Highest RATES in the nation, but high threshold of deductions)

        If you find a better study, I’d be glad to look at it. In the meantime, when someone says we are the HIGHEST taxed state, I will point out that Tax Foundation (not a leftist institution) says California is fourth overall, AND taxes for low to middle income are not as high as most people believe. I am at a loss as to why that seems to upset people so.

        With all due respect, I think “complete garbage” is extreme, unless you have better evidence.

        And, as always, the glass is at least half full.

        Reply this comment
      • S Moderation Douglas
        S Moderation Douglas 30 August, 2014, 09:31

        This may help.

        http://www.itep.org/modelfaq.php

        Probably difficult to verify ITEPs results because it is a computer model with literally thousands of inputs.

        Reply this comment
  5. michael
    michael 27 August, 2014, 12:41

    S Mod,

    In the event you did not notice, you can avoid sales taxes by discretion. Unfortunately you cannot avoid income taxes.

    I hope you enjoy paying for those nice new illegal aliens Jerry B just invited.

    Reply this comment
    • S Moderation Douglas
      S Moderation Douglas 30 August, 2014, 11:10

      Interesting afterthought. I was researching an answer to another poster, and found a national study of state income taxes.
      According to their calculations, a typical family of three in Los Angeles with an income of $50,000 pays NO state income tax.

      That’s one reason we can have high “rates”, but lower effective tax burdens.

      High rates, but also high threshold of exemptions and deductions.

      Reply this comment
  6. S Moderation Douglas
    S Moderation Douglas 27 August, 2014, 12:57

    My mother in law hasn’t paid income tax in years. Her non Social Security income is lower than either state or federal minimums.

    Very little sales tax. Her biggest spending is groceries. Property tax she can’t avoid. She sold her house, but her rent obviously includes tax passed through the landlord.

    I’m not sure how the aliens pertain to this article, but you realize there are studies which conclude that immigrants, legal or not, are a net financial benefit.

    Reply this comment
  7. bob
    bob 27 August, 2014, 14:24

    And I’m sure S Moderation Doglass would be continue to be a Demoncrat apologist even if taxes were jacked up another 50% in this state.

    I’m sure he will have great things to say when AB32 kicks in next year and our gasoline goes up 8 to 10 cents or more a gallon (and we already have the highest gas tax in the country).

    Why not just send our paychecks directly to Jerry and the Demoncrats and let them take it all? I’m sure they will spend it more wisely than we ever could.

    Reply this comment
  8. S Moderation Douglas
    S Moderation Douglas 27 August, 2014, 14:49

    “S Moderation Doglass” did not offer an opinion one way or the other on whether the taxes were too high or too low.

    Merely pointing out the FACT that the often repeated claims that California has the nations highest taxes, is incorrect. And the fact that taxes for all those who earn an average income in California, or less, are actually LOWER than the national average.

    On a personal level, I would prefer to pay LOWER taxes. If I didn’t have to pay income, sales, and property taxes, I could buy a new car every year, (do they still make Yugo’s?) Of course, there would be no roads to drive it on.

    Reply this comment
  9. S Moderation Douglas
    S Moderation Douglas 27 August, 2014, 15:01

    “But at least residents can rest comfortably knowing that public employees don’t have to fret about how they’ll make ends meet in their retirement.”

    That SOUNDS like a Seilerism. Is it borrowed?

    Reply this comment
  10. bob
    bob 27 August, 2014, 19:05

    Merely pointing out the FACT that the often repeated claims that California has the nations highest taxes, is incorrect. And the fact that taxes for all those who earn an average income in California, or less, are actually LOWER than the national average.

    Where are your sources for such a claim?

    Yeah, doglass you must be right and Kiplinger, the Wall Street Journal and numerous other organizations that have research California and come to the conclusion that it has among the highest if not the highest taxes overall must be wrong.

    You can’t deny that Colliefornia (as Ahnode calls it) has the highest fuel tax and it’s going up with AB32 kicking in and fuel prices ripple right through the cost of everything else. Colliefornia is one of the most expensive places in the country to live. Also, if you make under 50k you are in a 9.3% marginal tax rate and no other state has such a high rate at such a low income level. http://www.tax-brackets.org/californiataxtable

    Reply this comment
  11. S Moderation Douglases
    S Moderation Douglases 27 August, 2014, 20:37

    From my original post:

    (data from THE INSTITUTE ON TAXATION & ECONOMIC POLICY) – See more at: http://calwatchdog.com/2014/08/27/kiplinger-ca-taxes-highest-and-state-hostile-to-retirees-too/#comment-92597

    Simple concept.

    State A has 10% income tax and residents can deduct or exclude 10% of income.

    State C has 13% income tax and residents can deduct or exclude 35% of income.

    State C has higher rates, but lower absolute taxes.
    …………………..
    I reiterate: cut and paste….”Did you know? Kiplinger is comparing tax rates.”

    Kiplinger is correct…California has the highest tax RATES!!

    “doglass” ….is ALSO correct. California does NOT have the highest tax BURDEN.

    AND, again, lower and middle income have taxes lower than the national average.
    ………..

    “doglass”(are we still calling that a typo, bob? Because it won’t get past my spell checker)

    Reply this comment
    • bob
      bob 28 August, 2014, 09:47

      State C has 13% income tax and residents can deduct or exclude 35% of income.

      In Colliefornia you can exclude 35% of your income? What can they possibly be smoking?

      Reply this comment
      • S Moderation Douglas
        S Moderation Douglas 28 August, 2014, 10:59

        I never said anything about California, bob.
        It was an example of the concept, bob.
        Some people don’t understand how one state can have the highest rates, but not the highest taxes, bob.

        And I never said Kiplinger was WRONG. Only that tax RATES are only ONE factor in computing tax.

        It’s like a fifth grade math word problem.

        BUT, some people are fixated on rates, and ignore the actual dollars going out of their pocket, bob.

        Reply this comment
        • bob
          bob 28 August, 2014, 11:20

          Assuming a person makes 50k and is in the 9.3% bracket, has no dependence and does not itemize (using CA standard deduction) the person will pay more in Colliefornia income tax than if they were residents of other states.

          Reply this comment
          • S Moderation Douglas
            S Moderation Douglas 28 August, 2014, 13:11

            The middle income group in California ranges from ranges from $36,000 to $57,000, with an average of $45900.

            The average total state plus local tax burden for this group is 8.2% of income.
            The national average for this group is 9.4%.

            If you’re an average person in California, that’s 1.2% of $45,900.
            Or $550 in your pocket, plus the privilege of living in this fine state.

            Your mileage may very.

            And the glass is AT LEAST half full.
            The middle income group in California ranges from ranges from $36,000 to $57,000, with an average of $45900.

            The average total state plus local tax burden for this group is 8.2% of income.
            The national average for this group is 9.4%.

            If you’re an average person in California, that’s 1.2% of $45,900.
            Or $550 in your pocket, plus the privilege of living in this fine state.

            Your mileage may very.

            And the glass is AT LEAST half full.

            http://www.itep.org/whopays/

          • S Moderation Douglas
            S Moderation Douglas 28 August, 2014, 14:22

            Sorry, I guess that bears repeating.

          • bob
            bob 28 August, 2014, 17:45

            So what’s the S stand for in S Moderation Doglass?

            I can imagine….

            Anyhoo, Colliefornia (as Ahnode calls it) should have lower than average taxes to help the middle class and poor since the cost of living is so much higher than other states but the DemoNcrats would never consider it.

            You can try to sugar coat it any way ya want Doglass but you can’t make this pig pretty.


            April 7 2014

            Californians carried the nation’s fourth highest state and local tax burden in 2011, the Tax Foundation says in a new report, largely because its personal incomes are markedly lower than those of other high-tax states.

            The Washington-based Tax Foundation annually calculates state and local tax burdens as a percentage of personal incomes and California has traditionally been in the top tier. But the data are always several years old and 2011 was the last year before a temporary, voter-approved increase in sales and personal income taxes went into effect. Therefore, the 2012 rankings a year from now could push California higher.

            For 2011, the Tax Foundation calculated that California’s tax burden was 11.4 percent of its average per capita income of $45,354, or $5,136. New York was the highest at 12.6 percent, followed by New Jersey at 12.3 percent and Connecticut at 11.9 percent. Wyoming residents had the lowest tax burden, 6.9 percent, and the national average was 9.8 percent.

            http://blogs.sacbee.com/capitolalertlatest/2014/04/california-still-holds-4th-place-in-state-local-tax-burdens.html

    • bob
      bob 28 August, 2014, 17:59

      doglass”(are we still calling that a typo, bob? Because it won’t get past my spell checker)

      Yes it is a typo. I need to get some new glasses and a spell checker but try to remember most of us are not rich liberals like you who can afford such things including fancy pants spell checkers.

      Reply this comment
  12. Bill Gore
    Bill Gore 27 August, 2014, 22:26

    Add to the OVERT taxes (sales, income, property) the COVERT taxes: worker’s comp premiums, unemployment insurance premiums, extreme bossy regulatory hassles at the city, county, state level, not to mention a starving zombie army of disability and liability attornies….If you can’t handle the climate or culture of Texas, and your life does not center around some industrial park off of some freeway, then the entire northwest looks pretty dang inviting compared to California. Make like Buck Knives and cmon up to the Redoubt…Leave some room for the entire country of Mexico, which was just invited by Gov Brown ( a former Jesuit seminarian BTW). They will need many benefits while they get established……

    Reply this comment
  13. S Moderation Douglas
    S Moderation Douglas 27 August, 2014, 22:36

    “Waiting moderation”

    Really?

    Moderation is my middle name!

    Reply this comment
  14. Donkey
    Donkey 28 August, 2014, 08:41

    The RAGWUS feeders have it made in the Golden State. The Boomers not affiliated with the RAGWUS, that worked all their lives, saved, bought a home and paid it off, are also doing ok, but a large group of younger private sector workers will never have any hope of owning a home or retiring in this state, with most of their taxes going to the fat pay and pensions of the RAGWUS parasites. 🙂

    Reply this comment
    • S Moderation Douglas
      S Moderation Douglas 28 August, 2014, 14:30

      The next generation is screwed.

      I think that’s the same thing they said thirty years ago.

      And a hundred years ago.

      And so on.

      My grandkids will live in a world I could only dream of.

      Reply this comment
      • Donkey
        Donkey 28 August, 2014, 21:00

        Lay of the crack S&MD!! Your grandkids are broke, as are mine. No generation has left the debt for their kids and grandkids like the RAGWUS feeders have. 🙂

        Reply this comment
        • S Moderation Douglas
          S Moderation Douglas 29 August, 2014, 21:54

          Just talked to my granddaughter, she’s paying off student loans, but doing quite well in IT in San Francisco. Grandson is getting married and going to Hawaii for honeymoon. IBEW is doing OK in the bay area.

          They don’t share your pessimism.

          Neither of them has EVER heard of, you know, that five letter acronym.

          Reply this comment
          • Donkey
            Donkey 2 September, 2014, 21:24

            But you are still talking about the RAGWUS S&MD. 🙂

    • bob
      bob 28 August, 2014, 19:22

      Womans smoke dance rawgus fall fest 2012 round 2

      http://m.youtube.com/watch?v=z2Klm36Kp_A

      Reply this comment
  15. Queeg
    Queeg 28 August, 2014, 20:50

    Mistakenly, was on a few centavos bus in Mexico City in 1964. People were hanging off the infernal thing…like….everywhere….while five menacing Crocidillas were careening and jockeying to pass each other with only three skimpy road lanes…..ahead…

    Back to the bus from hell….some had chickens in cages….feathers flying….the smells…oh my-

    Back, a relief, to the tourista hotel for Emilo’s fresh squeezed nectars in our awesome Tom Collins style drinks. Ah!

    Contrasts……get used to them……either inflation will get ya in California or taxes/fees…….and there be chickens in your shopping cage!

    Reply this comment

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