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