California has a large number of areas designated as Qualified Opportunity Zones as the number now stands at 879 census tracts in every state throughout America’s underserved communities. Qualifying as an opportunity zone requires a nomination from the governor as well as the CEO of U.S. Territories. In the state of California, all but one county have areas labeled as opportunity zones. The largest opportunity zones in California by area and population are as follows:
Uptown, West Oakland, Coliseum Industrial, Jingletown
South and Downtown
East Northside, Washington Guadalupe, Market Almaden, Mayfair
South Park, Golden Hill, Barrio Logan
California has been at the forefront of designating opportunity zones throughout the US. It has emerged as an early national leader when it comes to opportunity zones as its top four cities featuring opportunity zones are among the top identified census tracts in the entire country.
The basis behind the creation of Opportunity Zones is to foster private investments in areas that are considered to be economically distressed. This is typically defined by low-income areas and is helped through capital gains tax incentives. There are several qualifications that can lead to an area being nominated as an opportunity zone, although the majority qualify because they meet income requirements.
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California Tax Situation
California has the highest state income tax in the nation as it stands at 13.3 percent. Similarly, it features the highest sales tax of any state at 7.25 percent. The state does not offer lower tax rates on capital gains, even when they are considered long term. California has a history of raising taxes incrementally dating back to 1978. These increases have continued to have a direct impact on state revenues.
California’s state taxes are not only the highest in the nation, but they are exceedingly high by a decent margin. No other state currently features an income tax rate in double digits. The next highest tax rate is 9.9 percent in nearby Oregon. However, these taxes have not gone up without input from residents. There have been numerous tax increases that resulted from voter-approved tax propositions and amendments.
Not only is California known for its high taxes, it is also known for its propensity to tax the wealthy. For example, the income tax for residents making between $53K and $259K per year is 9.3 percent. Coincidentally, California’s property taxes remain low, thanks in part to Proposition 13, which was introduced in 1978.
Industries with Tax Breaks
There are a number of different industries that are eligible for tax breaks in the state of California. The state government features numerous incentive programs while local governments have a variety of options as well. Here is a look at some of the top industries that benefit from California tax breaks.
This sector is highly supported in California when it comes to tax breaks and leads all industries
The Sales and Use Tax Exemption for Agriculture provides those in the farm industry with a partial exemption
The second largest tax break in 2016 went to a construction company for its work on the LA Convention Center
Walt Disney and other large studios are among the companies benefitting from these tax breaks
California Lending for Energy and Environmental Needs (CLEEN), among a number of other clean energy corporations, aids investors with green initiatives
The tax breaks are not enough to keep all industries in the state of California. Food manufacturing companies have been leaving the state because of the high tax rates and there are also major car manufacturers who have fled California. While not one industry has been overwhelmingly decimated by these departures, there are consistent departures across a number of industries.
State Financial Facts
It is important to point out that the cost of living is high throughout the state of California. This has hindered the ability to save money among the majority of residents. Here is a look at some of the state’s key financial facts:
- Median household income – $77,359
- Median household savings
- $0 in savings: 39%
- $1,000 or less in savings: 56%
- Total household investments
54 percent of families that own their home
Median value of California home – $409,300
21.1 percent of jobs in California are in lower wage sectors
Current economic condition of California
The state of California is responsible for 14.1 percent of the gross domestic product in the United States That type of production leads all states and there has also been a 2.7 percent increase in 2018. That is expected to continue to increase over the next few years. Meanwhile, the unemployment rate continues to decrease as it is at 4.8 percent and trending downward. The creation of new jobs are taking place in administrative and support services along with health care and social assistance.
The economy of California ranks fifth in the world and that is just in front of Great Britain. However, not everything is as stellar as it sounds. There is difficulty when it comes to buying a home because of the high cost of living, which has caused the price of homes to escalate.
California has also rebounded from the financial crisis of almost a decade ago and since that time, the state has been responsible for 20 percent of the country’s economic growth. Unemployment is as low as its been since 2000. But a high deficit that continues to grow could lead to more hikes in income tax rates, which would surmount housing difficulties.
Primary Industries in California
There is a lot of diversity when it comes to all the industries that are thriving in California. The economy is larger than that of many small counties, which means it is rich with industry. However, there are a handful of industries that lead the way in California and they are as follows:
- Motion Picture
Top Economic Cities in California
California is a haven for cities with thriving economies as some of those cities are ranked extremely high across the national landscape. San Jose ranks top in the country and that has to do with its proximity to Silicon Valley. The tech boom also extends to Santa Clara while San Francisco has also felt the affect and is home to 13 Fortune 1000 companies. Here is a look at those top cities:
- San Jose
- Santa Clara
- San Francisco
- Los Angeles
- Long Beach
- San Diego
There are still some cities and counties that have not been able to benefit from the last decade of economic growth. Unemployment rates have soared over 33 percent in the city of Mendota in Fresno County. The same number stands for the city of Westmorland in Imperial County. Mendota County has high rates of unemployment and considered one of the worst economic cities in California. The city of Stockton has suffered because of high crime rates and high levels of air pollution while the city of Merced has an unemployment rate over 35 percent. It is these types of cities, lying among the high growth areas, that the Opportunity Zone program of the 2017 tax cuts and jobs act was meant to grow.