Who Bears the Burden?

Many Californians are confused about who among us bears the burden of state taxes. The numbers show that individuals, rather than companies, shoulder most of the costs. And among individuals, the wealthiest pay by far the biggest share.

California’s personal income tax is progressive . . .

Most of California’s personal income tax revenue comes from its wealthiest citizens, while the bottom 60 percent of earners have paid a declining share of total state income tax revenues.

Percent of Total Personal Income Tax Paid

1970 1980 1990 Upper 73.94% 72.67% 79.58% Upper Middle 14.70% 17.91% 14.15% Middle 7.57% 7.45% 5.34% Lower Middle 3.31% 1.85% 0.90% Lowest 0.48% 0.12% 0.03%

. . . and the wealthiest have paid a steadily growing share . . .

Another way of looking at the progressive nature of California’s personal income tax is to consider how big a share of their adjusted gross income is paid in taxes by people in various income groups.

Percent of Adjusted Gross Income Paid in Personal Income Tax:

1970 1980 1990 Upper 3.20% 4.72% 4.55% Upper-Middle 1.28% 2.43% 2.32% Middle 0.85% 1.66% 1.39% Lower Middle 0.54% 0.77% 0.49% Lower 0.18% 0.11% 0.04%

. . . yet the rich have continued to grow richer.

Despite their heavier tax payments, the wealthiest 20% of Californians have held onto an ever-larger share of the state’s wealth from decade to decade.

Percent of Total Personal Income Held, After Paying State Income Tax

1970 1980 1990 Upper 43.62% 49.32% 57.42% Upper Middle 22.14% 24.21% 20.45% Middle 17.20% 14.86% 13.03% Lower Middle 11.95% 7.99% 6.34% Low 5.09% 3.62% 2.76%

All together, individuals pay far more than business.

Despite several changes in tax rates, the proportion of state taxes paid by individuals and businesses has remained nearly constant for 30 years. Here’s the breakdown, based on 1991 figures and state estimates:

Business Individual Income Tax 21%* 79%* Sales Tax 35% 65% Property Tax 24% 76% Overall 24% 76%

* The personal and corporate income taxes are not exactly the same. Corporations pay a franchise tax based on their profits--that is, their revenues less all the costs of doing business. Only about half of corporate tax filers report any profits.

TAX FACTS

Californians told The Times Poll in March that they believed high taxes were the single most important problem facing California business.

In the 1990 tax year, single taxpayers were 42%, heads of households made up 13% and 2% filed separated or surviving spouses.

Source: Franchise Tax Board, Department of Finance

Data analysis by Richard O’Reilly, Times directoy of computer analysis, and Times researcher Nona Yates from Franchise Tax Board, California Department of Finance and State Board of Equalization data.