| Personal Income Tax or PIT in the State of California | | | | would be taxed at 1.4 percent, whereas if they had a |
| is paid in addition to the Federal Income tax. Introduced | | | | taxable income of one hundred thousand |
| in 1935, it singly generates the highest revenue for the | | | | Dollars, with other conditions remaining the same, their |
| state as compared to other sources. Both residents | | | | effective rate of taxation would be 4.8 percent |
| and non-residents are liable to pay PIT in California. | | | | instead. |
| Nonresidents pay California PIT only on income derived | | | | The major part of PIT revenue comes from wages |
| from sources in California. The state rose close to | | | | and salaries and accounts for nearly sixty percent of |
| thirty five billion dollars in the year 1999-2000, which | | | | the total. Capital gains taxation contributes to a much |
| accounted for about forty percent of the total | | | | lesser extent however, in recent years the share of |
| revenues generated by the state. | | | | capital gains has been steadily increasing. |
| California PIT is payable on income from all sources, | | | | This has been on account of many factors. Firstly, |
| unless covered by statutory exemption. Therefore | | | | because the nature of income is generally attributable |
| salary, wages, dividend, interest, capital gains and | | | | to high bracket income tax payers and is therefore, |
| income from business all are subject to PIT. | | | | subject to be taxed at higher rates. The dollar amount |
| Different categories of California personal income | | | | of capital gains has risen rapidly in recent times. Now |
| taxpayers include individuals and partnerships, sole | | | | as capital gains are highly volatile, being mostly related |
| proprietorships, estate and trusts. PIT rates in California | | | | to the stock market and the housing sector, they |
| are based on the status of the taxpayer. The returns | | | | make PIT volatile and difficult to forecast and this |
| can be filed under five different categories or status, | | | | poses many revenue-related challenges. |
| depending on where the taxpayer fits in. They can file | | | | In the US, forty-three states and the District of |
| as single, married filing a joint return, married filing a | | | | Columbia impose personal income tax. By making an |
| separate return, and surviving spouse or as head of | | | | interstate comparison, it is found that the California PIT |
| household. | | | | is above average than all other states. In marginal tax |
| For the computation of PIT, there are six different tax | | | | rates, the upper most level of marginal tax rate in |
| brackets, with a different rate of taxation for each | | | | California is quite high, as compared to most other |
| bracket. As per the year 2000 details, the rates varied | | | | states and it is next only to Oregon, although the |
| from one percent to three decimal points above nine | | | | lowest marginal tax rate covers a rather wide band of |
| percent of the taxable income. | | | | income range. The PIT burden in California is certainly |
| Personal Income Tax in California is a progressive tax, | | | | higher. It is another matter that the cumulative burden |
| which means that as your income level goes up, the | | | | of all other taxes in the state of California is near |
| effective rate of taxation rises. To cite an example, a | | | | average, which helps to mitigate the effects of a |
| married taxpaying couple with two dependants and | | | | higher PIT to some extent. |
| having a taxable income of fifty thousand dollars | | | | |