Since at least 1999 the California Budget Project has been issuing the report “Who Pays Taxes in California.” In the past I have spent considerable energy analyzing these reports:

• 4/17/2006: “Who Pays Taxes?“
• 4/12/2007: “California Budget Project Annual ‘Who Pays Taxes’ Report“
• 4/13/2007″ “‘Who Pays Taxes’ – Tax Burden Gap“

This year the report covers tax year 2005. And their climactic, final paragraph “Who doesn’t pay taxes in California” reads:

In 2005, the most recent year for which data are available, 520,567 taxpayers reported incomes of $200,000 or more. However, 1,597 of these households paid no California personal income tax. How did they do it? The largest tax breaks claimed by “no tax” households include enterprise zone tax credits, miscellaneous deductions, and the R&D Credit. The number of high-income “no tax” returns more than tripled between 1996 and 2005, rising from 510 to 1,597.

For 2005 there was a 16% increase in the number of taxpayers reporting an income of $200,000 or more. The percentage of those paying no personal income tax remained about the same at three tents of one percent.

The CBP also tells us:

Measured as a share of family income, California’s poorest families pay the most in taxes. The poorest fifth of the state’s households, with an average income of $11,100, spend 11.7 percent of their income on state taxes. In comparison, the wealthiest 1 percent, with an average income of $1.6 million, spend 7.1 percent of their income on state taxes.

The problem with this paragraph is that many in the media who will report this will understand it to mean that the poorest families are shouldering the majority of the State’s tax burden. For some reason, the CBP never quotes the FTB annual report on total tax liability. The FTB’s 2006 Annual Report (also covering 2005 data) states on page 27:

Total California tax liability was $43.1 billion for taxable year 2005. Compared to $36.1 billion in 2004, total tax liability increased by $7.0 billion (19.5%).

Tax liability was unevenly spread among income groups in taxable year 2005. Based on California AGI, the top one percent of returns accounted for 47.5% of all tax liability, compared to 42.7% for 2004. The top five percent paid 67.9% of all tax.

According to FTB’s chart, the bottom 60% of taxpayers in California shoulder a grand total of 3% of all personal income tax paid to the state.