California surprises many people with what it doesn't have: a city personal income tax. Despite California's sky-high 13.3% top state income tax rate — the highest in the United States — cities like Los Angeles, San Francisco, and San Jose add no additional personal income tax on residents. The state already captures a significant share of high earners' income, and no California city has implemented a city-level personal income tax analogous to New York City's.
However, California cities are far from tax-free environments. San Francisco's Gross Receipts Tax applies to business revenue at rates that vary by industry and by receipts tier (see the SF Treasurer's rate schedule). Los Angeles levies a Business Tax on gross receipts, with rates set per $1,000 of receipts by business class. Property taxes, sales taxes, and a dense web of special assessments (Mello-Roos, school bonds, infrastructure bonds) add to residents' total cost of living. This guide unpacks what California cities actually charge — and what the total burden looks like when combined with California's already punishing state income tax.
No California city or county levies a personal income tax on residents. Personal income tax is collected at the state level by the California Franchise Tax Board (FTB). California's progressive state income tax rates range from 1% to 12.3%, with a 1% Mental Health Services Tax surcharge on income over $1 million — bringing the top effective rate to 13.3%. This is already the highest state income tax rate in the US.
For comparison: a New York City resident earning $500,000 pays NY state income tax at a 6.85% marginal rate plus NYC city income tax at 3.876%, about 10.7% combined at the margin. A California resident at the same income faces an 11.3% marginal state rate (single filer) — comparable, but with no separate city layer. The absence of a city income tax is one of California's rare tax advantages, even if it's offset by the state's already-high rates.
San Francisco replaced its Payroll Expense Tax with a Gross Receipts Tax (GRT) starting in 2014. The GRT applies to businesses (not individual employees) based on their San Francisco gross receipts. Under the 2025/2026 schedule (revised by Proposition M), rates depend on both the industry category (seven categories, covering for example retail and wholesale trade, accommodation, real estate, manufacturing and transportation, professional services and information, financial services, and construction) and the business's level of San Francisco gross receipts, with rates stepping up in tiers. The rates are published in full by the SF Treasurer & Tax Collector; check the current schedule there rather than relying on a summary.
Under the 2025/2026 rules, a business is not required to file the GRT if its combined taxable San Francisco gross receipts are $5,000,000 or less (the threshold was $2,190,000 before Proposition M; special rules apply to lessors of residential real estate). San Francisco also imposes an Administrative Office Tax (AOT) of 1.47% of San Francisco payroll expense (tax years beginning in 2025) on large administrative offices: businesses with more than 1,000 U.S. employees and more than $1 billion in gross receipts that meet the administrative-office payroll test. Those businesses also owe a 1.5% Homelessness Gross Receipts Tax, for a combined 2.97%. The GRT does not affect individual employees' take-home pay directly — it is a business tax — but it influences total business operating costs in San Francisco.
Los Angeles levies a Business Tax on gross receipts from business activities conducted within city limits. The rates are structured by business classification and are expressed per $1,000 of gross receipts. Examples from the LA Office of Finance rate table (2018-present):
| Business Type | Rate per $1,000 gross receipts |
|---|---|
| Professions and occupations (lawyers, consultants) | $4.25 |
| Wholesale sales | $2.55 |
| Telephone companies | $1.27 |
| Child care providers | $1.01 |
Other classes (including retail, rental and other service businesses) fall between $1.01 and $4.25 per $1,000; see the Office of Finance rate table for your class. Small businesses with annual gross receipts under $100,000 are generally exempt from the LA Business Tax. Unlike San Francisco, LA has not implemented a large-company payroll surcharge, though ballot measures to this effect have been discussed. For individual W-2 employees in Los Angeles, the Business Tax has no direct impact — it applies to businesses, not individuals earning salaries.
California's Proposition 13 (1978) caps property tax at 1% of assessed value and limits annual assessment increases to 2% per year. This means longtime California homeowners often pay property taxes based on valuations from decades ago — dramatically lower than current market values. A homeowner who bought in San Francisco in 1995 for $300,000 might pay property tax on an assessed value of $480,000 today, while their neighbor who bought the same-type home in 2022 for $1.8 million pays tax on $1.8 million.
However, special assessments, Mello-Roos bonds, school bonds, and other voter-approved levies are added on top of the base 1% and can bring effective total property tax rates to 1.2% to 1.8% in many California communities. In newer developments (where Mello-Roos is common), the effective rate can approach 2% for new buyers. For renters, these costs are effectively embedded in rent prices — California's property tax structure contributes to the state's well-documented housing affordability crisis.
For individual California residents, the full income tax picture is state + federal (no city income tax layer). At key income levels for single filers:
| Income | Federal Tax | CA State Tax | Total | Effective Rate |
|---|---|---|---|---|
| $75,000 | ~$7,670 | ~$2,665 | ~$10,335 | 13.8% |
| $100,000 | ~$13,170 | ~$4,911 | ~$18,081 | 18.1% |
| $200,000 | ~$36,730 | ~$14,211 | ~$50,945 | 25.5% |
| $500,000 | ~$138,130 | ~$43,700 | ~$181,835 | 36.4% |
These figures show why many high earners leave California for Texas, Florida, or Nevada — at $500,000 income, a Californian pays approximately $43,700 more in state income tax than a Texan who pays no state income tax. The addition of California's high housing costs, property taxes, and sales taxes (7.25% state base, up to 10.75% in some cities) compounds the total cost of living in California's major cities.
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