Cal Facts 2002: State-Local Finance

State Taxes		Current Rate	Comments/Description
Personal Income		Marginal rates of 1% to 9.3% (7% AMT^a)	Married couples with gross incomes of $24,160 or less need not file. The top rate applies to married couples' taxable income in excess of $76,582.
Sales and Use		6%^b	Applies to final purchase price of tangible items, with exemptions for food and certain other items.
Corporation General Corporations		8.84%^c (6.65% AMT)	Applies to net income earned by corporations doing business in California.
Financial Corporations		10.84% (6.65% AMT plus adjustment factor)	For financial corporations, a portion of the tax is in lieu of certain local taxes.
Vehicle Fuel		18c/gallon of gasoline or diesel fuel	Tax is collected from fuel distributors or wholesalers with equivalent taxes levied on other types of vehicle fuels.
Alcohol and Cigarette Wine and beer Sparkling wine Spirits Cigarettes		20c/gallon 30c/gallon $3.30/gallon 87c/pack	Tax is collected from manufacturers or distributors. Equivalent taxes are collected on sale of other tobacco products.
Estate^d		0.8% to 16%	The estate tax is a "pick-up" tax to take advantage of the maximum state credit allowed against the federal estate tax, at no net cost to taxpayers.
Horse Racing License Fees	0.4% to 2%		Fees/taxes are levied on amounts wagered. Rate is dependent on type of racing and bet, and where the wager is placed.
Insurance	2.35%		Insurers are subject to the gross premiums tax in lieu of all other taxes except property taxes and vehicle license fees.
Local Taxes	Current Rate		Comments/Description
Property	1% (plus any rate necessary to cover voter-approved debt)		Tax is levied on assessed value (usually based on purchase price plus the value of improvements and a maximum annual inflation factor of 2%) of most real estate and various personal and business property.
Local Sales and Use	1.25% to 2.5%		Collected with state sales and use tax. Revenues go to cities, counties and special districts.
Vehicle License Fee	0.65%^e		Tax is applied to depreciated purchase price. It is collected by the state and distributed to cities and counties.
Other Local	Varies by jurisdiction		Types of taxes and rates vary by jurisdiction. Includes utility users tax, business license tax, and transient occupancy taxes.
^a Alternative minimum tax.
^b Includes rates levied for state-local program realignment and local public safety.
^c A 1.5 percent rate is levied on net income of Subchapter S corporations.
^d Inheritance and gift taxes have been repealed, but still apply to gifts and deaths prior to 1982. The state credit is being phased-out, pursuant to 2001 federal law changes.
^e The state provides additional funding, which results in total revenues to local governments equivalent to a 2 percent VLF rate.

Measure/ Election	Major Provisions
Proposition 13/ June 1978	Limits general property tax rates to 1 percent. Limits increases in assessed value after a property is bought or constructed. Makes Legislature responsible for dividing property tax among local entities. Requires two-thirds vote for Legislature to increase taxes, and two-thirds voter approval of new local special taxes.
Proposition 4/ November 1979	Generally limits spending by the state and local entities to prior-year amount, adjusted for population growth and inflation (now per capita personal income growth). Requires state to reimburse local entities for mandated costs.
Proposition 6/ June 1982	Prohibits state gift and inheritance taxes except for "pickup" tax qualifying for federal tax credit.
Proposition 7/ June 1982	Requires indexing of state personal income tax brackets for inflation.
Proposition 37/ November 1984	Establishes state lottery and dedicates revenue to education. Places prohibition of casino gambling in State Constitution.
Proposition 62/ November 1986	Requires approval of new local general taxes by two-thirds of the governing body and a majority of local voters (excludes charter cities).
Proposition 98/ November 1988	Establishes minimum state funding guarantee for K-12 schools and community colleges.
Proposition 99/ November 1988	Imposes a 25 cent per pack surtax on cigarettes and a comparable surtax on other tobacco products. Limits use of surtax revenue, primarily to augment health-related programs.
Proposition 162/ November 1992	Limits the Legislature�s authority over PERS and other public retirement systems, including their administrative costs and actuarial assumptions.
Proposition 163/ November 1992	Repealed "snack tax" and prohibits any future sales tax on food items, including candy, snacks, and bottled water.
Proposition 172/ November 1992	Imposes half-cent sales tax and dedicates the revenue to local public safety programs.
Proposition 218/ November 1996	Limits authority of local governments to impose taxes and property-related assessments, fees, and charges. Requires majority of voters to approve increases in all general taxes, and reiterates that two-thirds must approve special taxes.
Proposition 10/ November 1998	Imposes a 50 cent per pack surtax on cigarettes, and higher surtax on other tobacco products. Limits use of revenues, primarily to augment early childhood development programs.
Proposition 39/ November 2000	Allows 55 percent of voters to approve local general obligation bonds for school facilities.
Proposition 42/ March 2002	Permanently directs to transportation purposes sales taxes on gasoline previously deposited in the General Fund.
Proposition 49/ November 2002	Requires that the state provide funds for after-school programs, beginning in 2004-05.

State Level	Legislative Approval	Voter Approval
Taxes	2/3	None
General obligation bonds	2/3	Majority
Other debt^a	Majority	None
Fees	Majority	None
Local Level	Governing Body Approval	Voter Approval
City or county �general� taxes (revenues used for unrestricted purposes)	2/3 (Majority for charter cities)	Majority
City or county �special� taxes (revenues used for specific purposes)	Majority	2/3
All school or special district taxes	Majority	2/3
General obligation bonds	Majority	2/3^b
Other debt	Majority	None
Property assessments	Majority	Majority of affected property owners. Votes weighted by assessment liability
Property�related fees	Majority	2/3 of voters or majority of affected property owners^c
Fees�all other	Majority	None
^a Includes revenue and lease-revenue bonds and certificates of participation.
^b Exception: The Constitution specifies that a majority of voters can approve bonds used for repairing or replacing unsafe public school buildings and 55 percent of voters can approve bonds for new school facilities under certain conditions.
^c No vote required for gas, electric, water, sewer, refuse, or developer fees.

Property Tax Shifts
1992 and 1993	*Ongoing Revenue Shifts.* State shifted property taxes from counties and other local entities to schools in order to reduce state costs. Subsequently, these reduced county revenues were in the aggregate mostly offset by various mechanisms, including funding for public safety (Proposition 172 sales tax revenues, COPS funding, and changes to trial court funding) and general assistance mandate relief.
Health and Social Services
1991	*Realignment.* Shifted authority from the state to counties, and increased counties� share of costs, for many health and social services programs. Provided new revenue sources to counties to offset increased county costs.
1997	*Welfare Reform.* Provided counties with more flexibility regarding (1) delivery of welfare-to-work services and (2) recipient participation requirements. Provided fiscal incentives for counties to assist recipients in getting jobs.
Trial Court Funding
1988	*Brown-Presley Act.* Provided initial state funding through block grants to counties based on total judicial positions.
1997	*County Cap.* Placed a cap on county expenditures for trial courts, resulting in future increases in state costs.
2000	*Court Employees.* Established a new trial court employee personnel system, transferring the responsibility for their employment from the counties to the respective trial courts.
2002	*Court Facilities.* Specifies the process for transferring trial court facilities from counties to the state.
Transportation
2000	*Traffic Congestion Relief Program.* Authorized $6.9 billion in new funds over six years for congestion relief and local streets and roads.

Legislative Analyst's Office, December 2002

2002 Cal Facts

State-Local Finances

California's Tax Burden Is Somewhat Above Average

Taxes Per $100 of Personal Income

California's Governments Rely On a Variety of Taxes

Initiative Measures Have Had Major State-Local Fiscal Implications

Approval Requirements for State and Local Revenues

Californians Are Served by Over 6,000 Local Entities

Property Taxes Are Distributed to Many Entities Within a County

School's Share of the Property Tax Has Changed Over the Years

How Much Property Taxes Do Counties and Cities Receive?

1999-00

Major Changes in the State-County Relationship During Past Decade

Major County Programs—2002-03

An Overview of County Finance

1999-00

An Overview of City Finance

1998-99