Fact check: Does California’s middle class pay less in taxes than in other states?

“The American people don’t know this. We have the highest tax rate for the 1%, but middle-class families actually paid less than the majority of states in America in California,” Gov. Gavin Newsom told Fox News host Sean Hannity last week.

The governor was half-right.

California’s income, sales and excise and property taxes on middle class residents can be viewed as less than in many states.

But it depends on how one defines “middle class.” And ”tax burden”— is it measured by the rate of taxation or the amount one pays?

“If looking at combined state and local taxes as a share of family income, then Governor Newsom is correct,” said Lucy Dadayan, principal research associate at the nonpartisan Tax Policy Center in Washington..

But viewed another way, Dadayan said, Newsom’s comment is “not quite accurate about the middle class families paying less than most Americans,” since incomes and property values tend to be higher in California.

As the governor tries to broaden his appeal by speaking to national audiences, he has labored to debunk what he regards as unfair or misleading characterizations of his home state. That includes California’s reputation as a high-tax state.

His comment to Hannity came as they debated what constitutes effective tax policy. Hannity said California’s system is a “redistribution of wealth.” Newsom countered that it’s a progressive system that asks those who have the most to pay the most.

What is the middle class?

Asked where Newsom gets his information about comparative taxation, his staff cited a well-regarded study by the Institute on Taxation and Economic Policy, a progressive economic research firm, to make his case.

Looking at the issue from a purely statistical standpoint, Newsom is correct that the middle income earner pays less in total than in most states.

The ITEP study shows that Incomes in California’s middle 20% — those earning $39,100 to $62,300 — pay an average of 8.3% in state and local income, property and sales and excise taxes.

That gives California the 11th-lowest tax burden in the country for that income bracket.

The study also notes as laudable several state tax provisions. These include a graduated personal income tax structure, personal income tax credits in place of personal and dependent exemptions, and limits on itemized deductions for upper-income taxpayers.

“California’s state and local tax system does not worsen income inequality and ranks 51st on the (tax inequality) index,” the study says. Newsom frequently cited California’s 13.3% income tax rate on its wealthiest residents during the “Hannity” appearances.

But “middle class” is a term that can mean one thing to economic analysts and another to consumers.

Gallup last year found that 52% of Americans regard themselves as middle class, and this year, its survey found people see $85,000 annually as the minimum for a family of four to “get by.”

The median household income in California in 2021 was $81,575, according to Federal Reserve Economic Data. The California tax burden for someone with that income would be 9% and push California down toward the middle of the pack — 21st lowest in the nation for those earners, according to the ITEP ranking.

“As their incomes grow, their tax burden increases dramatically,’’ said Jared Walczak, vice president of state projects at the Tax Foundation, a Washington-based conservative-leaning research group.

Low or high tax burden?

California’s property tax rates do remain relatively low. They’re limited by Proposition 13, the 1978 initiative that limits property tax increases.

But because property values in California are often higher than elsewhere, residents may pay larger amounts in property tax. Comparing property tax burdens between states can be misleading, Walczak said, because of “massive disparities in property values.”

For instance, while Texans tend to pay a higher property tax rate than Californians, the average Texas home costs half as much as one in California, so the actual payments are often similar.

The median home price in Texas this winter was $326,800. The median in California for sales of existing homes in April was $815,340.