Does California Have High Taxes? Income, Sales, and Property

Yes, California does have high taxes by most measures, but the answer depends on what kind of tax you mean and where you sit on the income scale. The state has the highest top personal income tax rate in the country at 13.3%, a base sales tax of 7.25% before local add-ons, and one of the steepest gasoline excise taxes anywhere. Property taxes, on the other hand, are below the national average thanks to Proposition 13, and there is no state estate or inheritance tax. Overall, California’s combined state and local tax burden runs about 13.5% of personal income, placing it among the five most heavily taxed states.¹

Income Tax Is Where California Stands Out

California taxes personal income on a steeply progressive scale under Revenue and Taxation Code Section 17041. Rates begin at 1% and climb through nine brackets to 12.3% for single filers with taxable income above roughly $743,000, or married couples filing jointly above $1,000,000, in 2026.² The bracket thresholds adjust each year for inflation.

Anyone with income above $1 million pays an additional 1% Mental Health Services surcharge, pushing the top marginal rate to 13.3%.³ No other state matches that. The 2026 brackets for single filers:

1.00% up to $11,079
2.00% from $11,080 to $26,264
4.00% from $26,265 to $41,452
6.00% from $41,453 to $57,542
8.00% from $57,543 to $72,724
9.30% from $72,725 to $371,479
10.30% from $371,480 to $445,771
11.30% from $445,772 to $742,953
12.30% over $742,953
13.30% over $1,000,000 (includes the Mental Health Services surcharge)

Married couples filing jointly get wider brackets, so the 12.3% rate does not start until combined income exceeds $1,000,000.²

There is also a separate State Disability Insurance withholding of 1.3% on all wages in 2026, with no wage cap.⁴ Combined with the top income tax rate, the highest-earning wage workers face an effective top state rate of 14.6% on W-2 income.

Capital Gains Get No Break

California does not offer a preferential rate for long-term capital gains. Short-term and long-term gains alike are taxed as ordinary income at the same progressive rates.⁵ Selling stock, a business, or real estate can push a resident into the 13.3% bracket for that year, which is one of the sharpest single-year hits available in any state tax code.

Sales Tax and Use Tax

Every retail purchase of tangible goods starts with a statewide base sales tax of 7.25%.⁶ Cities and counties often layer voter-approved district taxes on top, pushing the combined rate above 10% in some areas. The statewide average combined rate is about 8.98%.⁷ Groceries (unprepared), prescription drugs, and a handful of other necessities are exempt.

Buying online or by mail from an out-of-state seller that does not collect California tax does not avoid the charge. You owe use tax at the same combined rate, usually reported on your annual income tax return. Anyone with more than $10,000 per year in taxable out-of-state purchases (excluding vehicles, vessels, and aircraft) counts as a qualified purchaser and must register with the CDTFA to file and pay by April 15.⁸

Property Tax Is the Surprise

For all its reputation as a high-tax state, California’s property tax rules are relatively gentle. Proposition 13, a 1978 constitutional amendment, caps the base property tax rate at 1% of assessed value.⁹ Assessed value is set at purchase (or at completed new construction) and can only increase by 2% per year or the inflation rate, whichever is lower.¹⁰ Long-term owners often pay tax on a fraction of what their home is worth today.

The effective property tax rate statewide is about 0.70%, ranking in the lower third of all states.⁷ The catch is that California home prices are among the highest in the country, so a below-average rate on a $900,000 house still means roughly $6,300 a year. And new buyers pay far more than neighbors who bought decades ago, because their assessments reflect current prices.

Supplemental Bills and Mello-Roos

New homeowners often receive supplemental property tax bills on top of the regular annual bill. Whenever a property changes hands or new construction wraps up, the county reassesses at market value and issues a prorated bill (or refund) for the difference through the end of the fiscal year.¹¹ Depending on the closing date, you might get one or two of these.

Homes inside a Community Facilities District (Mello-Roos district) carry an additional special tax to fund local infrastructure like roads, sewers, or schools. It shows up as a separate line on the property tax bill and can add hundreds or thousands of dollars a year. Sellers must disclose the obligation before closing, but it pays to check for it before making an offer.

Fuel, Vehicle, and Other Excise Taxes

California’s gasoline excise tax runs 61.2 cents per gallon for July 2025 through June 2026, before federal taxes and cap-and-trade costs.¹² The rate resets each July based on the California CPI.

Other excise taxes hit specific products:

Cigarettes: $2.87 per pack of 20.¹³
Other tobacco products: 54.27% of wholesale cost.
Beer and wine: $0.20 per gallon.
Distilled spirits: $3.30 per gallon at 100 proof or less, $6.60 above.

Every registered vehicle also owes an annual Vehicle License Fee equal to 0.65% of the purchase price or value, decreasing over the first 11 renewal years and resetting on sale.¹⁴

What California Doesn’t Tax

California has no state estate tax and no inheritance tax. When a resident dies, the estate is subject only to the federal estate tax, which in 2025 applies above $13.99 million per person. Heirs receive inherited property with no separate California levy on the transfer, which is unusual for a high-tax state and makes California relatively favorable for wealth passing between generations.

Businesses face their own layer of costs, including a flat 8.84% corporate income tax, a 1.5% rate on S corporations, and an $800 minimum annual franchise tax for corporations and most LLCs, plus tiered LLC fees on gross California income.¹⁵¹⁶ Those costs land on business owners rather than employees or shoppers directly.

How the Total Burden Actually Falls

Put together, California’s combined state and local tax burden comes to roughly 13.5% of personal income, ranking 46th out of 50 states (with 50th being the most burdensome).¹ Per capita collections run about $10,319 in combined state and local taxes.⁷ On the 2026 State Tax Competitiveness Index, which grades how well a state’s tax code works for business, California ranks 48th out of 50.¹⁷

The weight is not spread evenly. The progressive income tax pushes most of the total onto high earners, so a household in the middle brackets often pays effective rates closer to those in other large states. Long-term homeowners protected by Proposition 13 pay well below what a new buyer next door pays. Investors and anyone realizing a large capital gain in a single year get the hardest hit, because gains stack on top of ordinary income and there is no preferential rate. Whether California feels expensive depends on your income level, when you bought your home, and how much of your money comes from investments rather than wages.

1
Tax Foundation. State and Local Tax Burdens, Calendar Year 2022
2
California Legislative Information. California Revenue and Taxation Code 17041
3
California Legislative Information. California Revenue and Taxation Code 17043
4
Employment Development Department. Contribution Rates, Withholding Schedules, and Meals and Lodging
5
Franchise Tax Board. Capital Gains and Losses
6
California Department of Tax and Fee Administration. Implementing New Local Jurisdictions or District Taxes
7
Tax Foundation. California Tax Rates, Collections, and Burdens
8
California Department of Tax and Fee Administration. California Use Tax
9
Justia. California Constitution Article XIII A Section 1 – Tax Limitation
10
Justia. California Constitution Article XIII A Section 2
11
California State Board of Equalization. Supplemental Assessment
12
California Department of Tax and Fee Administration. Tax Rates for Motor Vehicle and Diesel Fuels
13
California Department of Tax and Fee Administration. Tax Rates – Special Taxes and Fees
14
California Department of Motor Vehicles. Registration Fees
15
Franchise Tax Board. C Corporations
16
Franchise Tax Board. FTB Pub 3556 – Limited Liability Company Filing Information
17
Tax Foundation. 2026 State Tax Competitiveness Index