California, 4th Largest Economy in the World, Ranks Among 10 Worst in US for High Taxes

Chief Executive Magazine reports year after year that when CEOs across the country are surveyed, they name California as the worst state in the country in which to have to do business. Because of California’s highest-in-the-nation overall taxes, one of the highest business tax climates, the last Tax Foundation ranking California at No. 49 – the second worst in the nation, ahead only of New Jersey.

The Tax Foundation’s State Business Tax Climate Index 2022 finds California has moved to number #48 for worst taxes in the country, in a near three-way tie with Washington D.C., New York and New Jersey.

California still ranks 49th worst for individual taxes.

The Tax Foundation’s State Business Tax Climate Index is an indicator of which states’ tax systems are the most hospitable to business and economic growth, and is designed to show how well states structure their tax systems and provides a road map for improvement.

The Tax Foundation explains that the absence of a major tax is a common factor among many of the top 10 states. “Property taxes and unemployment insurance taxes are levied in every state, but there are several states that do without one or more of the major taxes: the corporate income tax, the individual income tax, or the sales tax.”

The 10 best states in this year’s Index are:

1. Wyoming
2. South Dakota
3. Alaska
4. Florida
5. Montana
6. New Hampshire
7. Nevada
8. Utah
9. Indiana
10. North Carolina

Tax Foundation says the states in the bottom 10 tend to have a number of afflictions in common: “complex, non-neutral taxes with comparatively high rates. New Jersey, for example, is hampered by some of the highest property tax burdens in the country, has the highest-rate corporate income taxes in the county, and has one of the highest-rate individual income taxes. Additionally, the state has a particularly aggressive treatment of international income, levies an inheritance tax, and maintains some of the nation’s worst-structured individual income taxes.”

New Jersey appears to have adopted California’s draconian taxation policies, and doubled-down and expanded on them.

The 10 lowest-ranked, or worst, states in this year’s Index are:

41. Alabama
42. Rhode Island
43. Hawaii
44. Vermont
45. Minnesota
46. Maryland
47. Connecticut
48. California
49. New York
50. New Jersey

California’s taxation ranking shows that Proposition 13 has kept our property taxes in the middle of the pack, ranked at #19, but even that is down 5 places from last year. Our corporate taxes, individual taxes and sales taxes are extremely high. Passed by voters in 1978, Proposition 13 rolled back most local real property, or real estate, assessments to 1975 market value levels, limited the property tax rate to 1 percent plus the rate necessary to fund local voter-approved bonded indebtedness, and limited future property tax increases.

The Tax Foundation offers guidance to lawmakers, when assessing which changes to make:

1. Taxes matter to business. Business taxes affect business decisions, job creation and retention, plant location, competitiveness, the transparency of the tax system, and the long-term health of a state’s economy. Most importantly, taxes diminish profits.
2. States do not enact tax changes (increases or cuts) in a vacuum. Every tax law will in some way change a state’s competitive position relative to its immediate neighbors, its region, and even globally.