How Does California Make Money?

Most of the revenue of the state of California comes from personal income taxes, followed by sales and use taxes then corporate taxes, according to the California State Controller’s Office. Miscellaneous taxes and fees comprise the smallest segment of the government’s revenue. The state’s sources of revenue to the general fund have changed over time.

In descending order, California receives its revenue from personal income taxes, sales and use taxes, corporation taxes, vehicle fees, motor vehicle fuel taxes, insurance taxes, tobacco taxes, alcohol taxes and finally, estate, inheritance and gift taxes. Corporation taxes, income taxes and sales and use taxes make up 95 percent of California’s revenue stream.

During fiscal year 2013, California received 67 percent of its income from personal income taxes, amounting to $67.1 billion. In all, the state received $100.1 billion in revenue from July 1, 2012, to June 30, 2013. Personal income tax revenue steadily increased from 2008 to 2013. Corporate taxes amounted to $7.6 billion in 2013, which is a steady decline since 2008.

How California earned revenue was different in 1970 and gradually changed to the current pattern. Sales and use taxes comprised more than $30 billion of the state’s income versus more than $20 billion in personal income taxes. The third-highest source of revenue in 1970 was motor vehicle gasoline taxes.