California State raises its revenue by imposing various taxes such as estate tax, insurance tax, alcoholic beverage tax, gambling, motor vehicle tax and tobacco tax. In addition, the employees or the employers have to pay taxes to trust funds, to help disabled and unemployed employees.
Estate tax-This tax is the fifth largest source of the General Fund Tax and it was estimated as $937 million in 1999-00.In June 1982, this tax was established under Proposition 6. This eliminated the inheritance and the Gift tax law of the state. Estate tax is levied on the adjusted property value of an individual taxpayer, after his demise because the federal law permits a credit against the federal estate tax paid and the state rate is equal to the maximum federal credit allowed.
Insurance tax-This tax was implemented in 1911. This is the oldest tax in California. Insurance tax is charged on the premium sold by insurance companies and is charged on all the states insurance companies except on the license fees and the real estate taxes. This is the fourth largest source of General Fund revenue and it was raised by $1.3 billion in 1900-00, from 2000 companies.
Alcoholic Beverage Tax-Excise taxes are levied on the beverages sold by the manufacturers, on a per gallon basis. This tax is levied in addition to the federal excise tax. In addition to these two taxes, the retail establishment liquor owner pays an annual license fee. The tax rate differs, based on the type of beverage. The fund raised from this tax was estimated to be $274 million in 1999-00. Majority of this revenue is obtained from distilled beer and spirits.
Tax on Gambling related Activities-California State permits a state lottery, horse racing and bingo for charitable purposes.
. The state lottery was established under the Proposition 37, in November 1984. The California State Lottery Act sets the distribution of the lottery proceeds. Lottery revenue also funds a minor source for schools.
. Horse racing and the license fees are basically levied on the amounts that are raised during horse racing meets. This tax ranges from 0.4 to 2 percent and it depends on the type of wages, type of racing and also the placement of the wager. An estimated $35million was generated from these levies in 1999-00.
Motor tax- Motor tax is the main source of state special fund revenue, estimated to be around $8.4 billion of the special fund total.
Accounting to the largest share of motor taxes, the state fuel tax is mainly categorized into three types:
1. License Tax or Gas Tax-This tax is imposed on the fuel distributors, based on per gallon of fuel that is distributed. This tax levied contributes to the greatest share of fuel related tax revenue.
2. Used Fuel Tax- This is an excise tax which is levied on the used fuel. This is mainly imposed on alternative fuels such as compressed natural gas, ethanol and liquefied petroleum.
3. Diesel Fuel Tax-This tax is levied on the delivery and sale of diesel fuel and the record is generally collected from the distributors.
Tobacco tax-This tax is levied on cigarette distributors. The California State tobacco tax is currently $0.87 per pack.
Tax related to Employment-The disability insurance program is funded by the State Disability insurance company and it is levied on the employees and it is deducted from their payroll.