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