Where do California taxes rank nationally? A new study may surprise some

Sure, California is a high tax state. But it’s not the highest.

A new study from WalletHub, which analyzes financial data, says California is nowhere near the top of the state and local tax rate rankings of highest tax states.

Yes, the state income tax rate is among the steepest for wealthier people, topping out at 13.3% for millionaires, and its gasoline tax of 57.9 cents a gallon is considered the nation’s highest.

But add in other factors, such as real estate or sales taxes, as well as lower income rates as incomes get smaller, and the picture changes somewhat. California ranks 37th, or ahead of 13 other states and the District of Columbia, in the rankings of annual state and local tax rates.

The overall ranking “may seem surprising, but when you look closer at the data, you’ll find a more complex picture,” said WalletHub analyst Cassandra Happe.

The study found that a household with the median California income, which is higher than the national average, is paying $11,106 in total state and local taxes this year.

People in this household would typically own a home equal to the state median. The median single family home sales price in California was $822,200 in November, said the California Association of Realtors.

Residents in this household own a car valued at $26,420, based on the best selling cars last year. The household spends annually at an amount equal to the spending of those making the median state income.

Median household income in the state in 2022, the latest federal government data available, was $85,300, according to the St. Louis Fed..

Thirteen states and the District of Columbia have a higher average, topped by Conncticut and Hawaii.

Among the more specific rankings of effective tax payments in California, based on households with the median US. income of $75,586::

▪ Real estate taxes, 16th lowest. average of $2,007.

▪ Vehicle property tax, 28th lowest, $172.

▪ Effective income tax rate, 11th lowest, $699.

▪ Sales and excise taxes (including gasoline), 42nd lowest, $4,399.

What do the rankings mean?

Independent analysts had different views of the rankings.

The list is more of a cost of living chart than a tax policy ranking, said Richard Auxier, senior associate at the nonpartisan Urban-Brookings Tax Policy Center. California has made tax policy decisions to help lower income residents while many other states have not.

California may be listed as having a higher tax burden for lower income earners while a similarly diverse state such as Missouri ranks among the smallest.

But, Auxier said, “California does have a higher level of overall taxation than Missouri, and that broadly affects households at all income levels, but California taxes to provide services, and in fact California provides far more generous public services than Missouri, and those services largely benefit low-income households.

“Not to pick on Missouri, but I struggle to think of any way that Missouri is a better state for low-income workers than California,” he said.

The new study adds more fuel to a political debate that’s been raging for years.

Last year, Gov. Gavin Newsom maintained that most Texans pay higher tax rates than Californians.

A report from the Institute on Taxation and Economic Policy, a liberal research group, found that California had the nation’s fairest tax system and Texas had the second most unfair.

“Many low- and middle-income families pay lower taxes under California’s moderately progressive tax system than they would under the highly regressive systems used to fund public services in Texas and the other more conservative states,” ITEP said. But viewed another way, many in the middle class were taxed more in California.

ITEP said for the 40% of the highest earning people — those with incomes of $56,000 or more in Texas and $62,100 in California — Californians paid higher tax rates.