California's Business Tax Burden No Heavier than Average

Although my home state of California is often scrutinized for it's heavy corporate tax rate, according to this article from LA Times.com, the burden is no heavier than the national average. In fact, California takes an estimated 4.7% of what businesses produce in taxes, which is the exact same as the national average.

The government take is higher in Alaska (13.8%), New York (5.5%) and Florida (5.3%). Even Texas, known for rolling out the red carpet for business, pocketed more than California — 4.9%.

That's according to an annual study of the tax burdens in all 50 states by the Council on State Taxation, a business-friendly group led by senior executives of Chevron Corp., General Electric Co. and other major corporations.

"California is pretty middle-of-the-pack when it comes to business taxes," said Joseph R. Crosby, the organization's senior director of policy.

Although the state's corporate income tax rate — 8.84% — is among the higher in the nation, its bite is diminished by various tax credits and other measures that have been adopted over the years, including:

• One of the most generous research-and-development tax credits in the nation, allowing businesses to deduct 15% of the amount they increase their R&D funding over a base level. The national median is 6.5%, according to Yonghong Wu of the University of Illinois at Chicago.

• Proposition 13, the 1978 initiative that limits property tax increases to 1% a year until properties are sold, when they are reassessed at the market value. This has slowly shifted the property tax burden from businesses to homeowners, since commercial real estate changes hands less often than residential.

Continue reading at LA Times.com...

How The Tax Burden Has Changed Since 1960

From MSNBC.com:

We have a new president, with a restless and far-reaching agenda — but how will the nation pay for that agenda?

For John F. Kennedy, elected in 1960, it was taxes and borrowing. For President Barack Obama, to whom JFK is often compared, the answer’s the same: taxes and borrowing.

But with the April 15 filing deadline looming, it’s worth noting that the tax system over which Obama presides isn’t the one workers knew two generations ago when Kennedy was entering the White House.

If you’re 70 today, you may have just retired, but do you recall that when you started working in 1960, making a beginner's wage, you paid only about $70 in payroll taxes? And that was for whole year, not for one week or one month.

The biggest tax change since 1960 is the growth in Social Security and Medicare taxes, also known as payroll taxes.

You may not think about them as you prepare your income tax returns, but for most taxpayers, payroll taxes are a bigger burden than income taxes. According a report issued last week by the congressional Joint Committee on Taxation, for more than four out of five tax filers, employment taxes are a bigger burden than income taxes.

Growing importance of payroll taxes

And payroll taxes have become a larger source of revenue for the federal government than they were in 1960. Back then, they accounted for 16 cents of every dollar of federal tax revenues. Last year they accounted for about 35 cents of every revenue dollar.

Why? The Social Security tax rate today is more than twice as high as it was in 1960 and the amount of income subject to the tax is far bigger.

In 1960, only the first $4,800 of income was taxed — and at a rate of just three percent. This year the Social Security tax rate is more than twice as high, 6.2 percent, and the first $106,800 of earned income is taxed. (The amount subject to taxation goes up every year, using a formula based on increases in average wages.)