| In California, state taxes have always | | | | from nonresidents. Personal Income Tax |
| played an important role. At the end of | | | | also applies to proprietorships, |
| the 21st century, the state of | | | | partnerships, estates and trusts. |
| California spent a large amount of money | | | | The income offered by the Sub-chapter S |
| to provide public services to the | | | | corporations is subject to PIT taxation. |
| residents of California and the local | | | | Wages and salaries, interest, dividends, |
| businesses. The money spent has been | | | | business-related income and capital |
| provided by the state taxes. | | | | gains are also included in the Income |
| Three-quarters of the state treasury and | | | | Tax. One of the key articles that make |
| one-half of the local shares are all | | | | California Income tax unique is that |
| provided by taxes. | | | | single taxpayers only account for 45 |
| The taxes levied by California State are | | | | percent of total filed returns, but only |
| all included as State Taxes. The | | | | 26 percent of tax liabilities. |
| personal income tax or PIT, the sales | | | | Married-filing-joint taxpayers |
| and use tax or SUT, the bank and | | | | constitute 40 percent of total tax |
| corporation tax and major motor | | | | returns, but over 68 percent of tax |
| vehicle-related levies account for a | | | | liabilities. |
| major share of California's own-source | | | | Bank and Corporation Tax: |
| revenue. | | | | California taxes corporate profits. The |
| The income tax, the sales tax and the | | | | Bank and Corporation Tax or BCT is the |
| bank tax finance the state's General | | | | state's third largest source of General |
| Fund. The largest single tax that is | | | | Fund revenue. The tax raises annually an |
| generated by the residents of California | | | | estimated $6.1 billion or 9 percent of |
| is the PIT. This Tax accounts for over | | | | the total. The BCT applies to all |
| half of the General Fund revenue. | | | | corporations that earn income derived |
| The rest of the state expenditure is | | | | from or that is attributable to sources |
| taken care of by the special funds. | | | | in California. |
| These special funds are generated by the | | | | Except for the first two years of |
| motor vehicle-related taxes. Special | | | | operation of a firm, the basic tax rate |
| funds include tobacco-related taxes and | | | | on profits is 8.84 percent and an $800 |
| sales taxes. These funds support health | | | | minimum tax. Banks and financial |
| programs and local governments. | | | | institutions are exempted on local |
| Personal Income Tax: | | | | levies, but pay a higher rate of tax, |
| Established in 1935, the personal income | | | | which is 10.84 percent. Banks and |
| tax or PIT is the state's single largest | | | | corporations are also subjected to an |
| revenue source. In the year 2000, | | | | Alternative Minimum Tax or AMT, which is |
| California collected over $35 billion as | | | | similar to the personal income tax or |
| income tax. This tax accounts for | | | | PIT. This Alternate Minimum Tax has a |
| roughly 40 percent of all revenues and | | | | slightly lower rate of 6.64 percent. |
| half of General Fund revenue. | | | | Sub-chapter S corporations are subjected |
| The Personal income tax is levied on | | | | to a reduced tax rate of 1.5 percent. |
| both residents and nonresidents. | | | | California offers a share of the |
| Non-residents pay taxes on income | | | | domestic or worldwide business income |
| derived only from California sources. In | | | | for multi-state and multinational |
| 1998, there were over 13 million PIT | | | | corporations. |
| returns filed, which include 600,000 | | | | |