A tax is a charge or levy of money made by a governmental entity (state, local, or federal) against a taxpayer—usually a U.S. citizen or a person living or working in the United States. There are many kinds of taxes, including income tax, capital-gains tax, property tax, franchise tax, gift tax, ad valorem tax, sales tax, use tax, inheritance tax, and estate tax.
In California, as in other states, taxpayers are subject to a variety of taxes levied by state and local governments, as well as the federal government. California's state income tax rates are progressive, meaning they increase as income rises, and are among the highest in the United States. The state also imposes a capital gains tax, which is treated as regular income and taxed at the standard state income tax rates. Property taxes in California are governed by Proposition 13, which limits the rate to 1% of the property's assessed value and restricts annual increases in assessed value to a maximum of 2% per year, until the property is sold. California does not have a franchise tax, but it does have a franchise tax board which oversees the collection of state income taxes. The state does not impose a gift tax, but gifts may be subject to the federal gift tax. California applies an ad valorem tax on personal property, such as vehicles. Sales tax in California is a combination of state, county, and local taxes, and the state rate is 7.25%, with local jurisdictions able to add additional taxes. Use tax is similar to sales tax but applies to goods purchased out of state for use in California. California does not have an inheritance tax, but it does have an estate tax that is equivalent to the federal estate tax credit, effectively making it a pickup tax that does not impose an additional tax burden on the estate.
