AMONG THE HIGHEST IN THE NATION

California Taxes

2025 State Tax Competitiveness Index & Component Tax Ranks

California
#48

Subindex Rankings
Corporate Taxes #41
Individual Taxes #49
Sales Taxes #46
Property Taxes #23
Unemployment Insurance Taxes #25

The Tax Foundation's 2025 State Tax Competitiveness Index ranks California 48th out of all 50 states, due in large part to California’s high taxes and outdated, complex rules that make it expensive and unpredictable for both businesses and residents.

Note: A rank of 1 is best, 50 is worst. Rankings do not average to the total. States without a tax rank equally as 1. DC's score and rank do not affect other states. The report shows tax systems as of July 1, 2024 (the beginning of Fiscal Year 2025).

Property Tax

California's 1% property tax rate isn't the nation's highest. However, even with Proposition 13 capping property tax increases, the sheer cost of homes means Californians still pay some of the highest property tax bills in the country.

Income Tax

The state’s high income tax is another major contributor to its affordability challenges. With a top marginal rate of 13.3%, California imposes the highest personal income tax in the nation, far exceeding Hawaii’s second-place rate of 11%. California’s exorbitant personal income tax rates have prompted many residents to relocate to states like Texas and Nevada, where there is no state income tax. The exodus of wealthy individuals and business owners has been a growing trend, weakening California’s tax base and exacerbating the economic divide. 

Sales Tax

Sales taxes in California also rank among the highest in the country, with an average combined rate of 8.85%. Everyday necessities, from groceries to household goods, come with a hefty tax burden, further straining household budgets.

Corporate Tax

Businesses face similarly high taxation, with a flat corporate tax rate of 8.84%—one of the highest in the country. As companies struggle to justify the cost of operating in California, many have opted to relocate. The departure of major corporations underscores how the state’s tax policies are driving away investment and jobs, weakening the overall economy.