Thursday, February 13, 2014

U.S. Tax Rates? Not Competitive, But California's Are Worse

That's a big duh.

It’s even worse in the Golden State. California’s top marginal tax rate of 33% is the third-highest tax rate in the industrialized world, behind only Denmark and France. That creates a bias against savings, slows economic growth, and harms U.S. competitiveness. See The High Burden of State and Federal Capital Gains Tax Rates.

The lack of an adjustment for inflation makes it doubly painful. Your effective capital gains rate could be even higher. After all, much of the increase in the value of the asset might be due to inflation, not to real gains. If you really want to be impressed, check out California’s capital gain rate.

There isn’t one–it’s taxed as ordinary income. In California, those earning $254,250 to $305,100 a year now pay 10.3%. For $1 million-plus-earners, California’s rate is 13.3%. At the federal level, the capital gain rate remains 15% for some, but rose to 20% for higher income taxpayers. Add the 3.8% investment tax under Obamacare, and you have 23.8% for many.

California taxes capital gains just like income, as high as 13.3%. You pay up to a 33% combined federal and state tax on capital gains in California. That means you’re paying more than virtually anyone else in the world. Experts say the impact isn’t just digging deeper at tax time.

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