Every state raises taxes on its citizens to provide services at the state level. California levies an income tax in addition to a sales and use tax. Property taxes are levied in the state at a local county level. California's estate tax has now been phased out, and the state does not levy an inheritance tax.
California has six income tax rates, depending on the level of your income. The bands range from 1 percent to 9.55 percent. If you make a million dollars or more in a year, you will also be subject to an extra 1 percent surcharge, the Mental Health Services Tax. The Alternative Minimum Tax or AMT rate in California is 7.25 percent.
The state imposes a sales tax in conjunction with county and local sales taxes. The minimum combined sales taxes from all levels of government is 8.25 percent -- as of 2011, the highest minimum sales tax in the nation. The rate is higher in some cities and counties that levy a higher local sales tax, up to a maximum of 10.75 percent. Sales tax is only levied on goods sold and not on services.
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Businesses in California must also pay state taxes. Banks and other financial companies pay at a rate of 10.84 percent. Other C corporations pay 8.84 percent. The rate for general S corporations is 1.5 percent, and for bank and financial S corps it is 3.5 percent. There is an AMT rate for businesses, which is 6.65 percent.
Property taxes in California are assessed and collected at the county level. Each county tax assessor's office can decide the mil rate for its area, so property taxes vary widely across the state. In 1978, the state enacted Proposition 13 to place a cap on property taxes. The effect of this has been to place more burden on the sales tax, which has risen more than 2 percent in the time since the proposition was passed.