Cal Facts 1996--State Revenue

Cal Facts 1996, Part IV
State Revenue

Almost Two-Thirds of All State Revenues
Come From Income and Sales Taxes

1995-96 (In Billions)

General Fund revenues account for over three-fourths of total revenues.
Personal income taxes are the largest individual revenue source -- over one-third of total revenues and 45 percent of General Fund revenues.
Special funds are usually earmarked for specific purposes, such as transportation funding. Motor vehicle-related levies account for over half of all special fund revenues.

(In Billions)

After declining during the recession, total state revenues (excluding transfers) have grown in each of the last two years, averaging 5.7 percent.
During the past 13 years, however, total revenue growth has averaged 6.4 percent.
Average growth since 1983-84 has been faster for special fund revenues than General Fund revenues -- nearly 10 percent versus 5.7 percent.

1996 Income Year

California has a highly progressive income tax structure, meaning that as one's taxable income rises, so does one's average tax rate.
In 1996, marginal tax rates will range from 1 to 9.3 percent.
The top 7 percent of taxpayers -- those with incomes exceeding $100,000 annually -- will account for nearly 50 percent of total tax liabilities in 1996. This share is slightly lower than in 1995, primarily because of the scheduled elimination of the 10 percent and 11 percent tax brackets.

Sales tax rates vary by county because of the optional sales taxes which localities can choose to levy.
Existing sales tax rates range from 7.25 percent in counties with no optional sales and use taxes, to 8.5 percent in the City and County of San Francisco.
San Mateo and San Francisco can impose an additional 0.5 percent and 0.25 percent rates, respectively, beyond the 8.75~percent maximum statewide rate.

Taxable Sales as a Percent of Personal Income

The ratio of taxable sales to personal income has fallen significantly over the past 15 years.
This decline is consistent with the long-term shift in consumer spending towards services, which generally are not taxed in California.
The ratio is projected to remain relatively stable over the next few years.

Corporate Profits as a Percent of Personal Income

The ratio of corporate profits to state personal income is one key measure of the strength of the corporate tax base relative to the economy.
This ratio has rebounded in recent years from its historic 1990s low and is forecast to trend upward.
There are a number of factors contributing to the ratio's recent upward trend, including corporate cost containment, increased productivity, and higher sales volumes.

1991-92

Tax expenditure programs (TEPs) are the various tax exclusions, exemptions, preferential tax rates, credits, and deferrals which reduce the amount of revenues collected from the state's "basic" tax structure.
There are currently nearly 300 TEPs, including about 200 state-level TEPs and over 70 local property tax TEPs, which can impose state costs because the state backfills the lost local revenues.
The largest TEPs include income tax deductions for mortgage interest expenses, income tax exclusions for employer contributions to pension plans, and sales tax exemptions for general foodstuffs.
State-level TEPs cost $20~billion when last estimated in 1991-92.