Is California a High-Tax State?
California is often cited as a high-tax state, but is it? Does the size of government unfairly impinge on the public? It depends on how we measure, but, all things considered, the surprising answer is no.
One useful way to measure the tax burden on a population is as a percent of GDP (gross domestic product), which is a broad measure of the size of the economy. GDP is more useful measure than per capita since almost all tax revenue is imposed on different aspects of economic activity, much of which is related to companies, not just people.
Because our purpose is to look at the size of government overall, and because different states rely different types of revenue, we shouldn’t limit ourselves to looking at revenue from just a few common taxes. So we’ll take all government revenue into account, including taxes, fees, and other charges, at both the state and local level.
Including local revenue is especially important because states divide up responsibilities and revenue authority among levels of government in different way. As counties know, California is set apart by just how many state and federal programs locals perform.
Taking all of these factors into account, we find that California’s total state and local revenue compared to the state’s GDP is a little below the national median, ranking 27th out of 50, nestled between Nebraska (26) and Kansas (28).
Sitting well below several other high-GDP states—like New York (11), Ohio (18), Florida (19), and Pennsylvania (24)—but above others—like Texas (50), Illinois (41), and New Jersey (37)—the tax burden in California starts to feel awfully average.
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State and local revenue data from the US Census Bureau. GDP data from the Bureau of Economic Analysis.