California’s Highest-Income Taxes in the Nation: What Middle-Income Earners Need to Know

California’s personal income tax rates are the highest in the nation, with a top rate of 13.3% for incomes over $1 million, according to verified reporting from the San Diego Union-Tribune and tax policy sources.

This rate combines the state’s standard nine income tax brackets—which range from 1% to 12.3%—with an additional 1% surcharge on income exceeding $1 million, a measure designed to fund mental health services.

The tax burden is prompting high earners and retirees to relocate to states such as Texas, Florida, and Nevada, contributing to a net population decline in California for the third consecutive year in 2025, when the state lost over 108,000 residents.

While international immigration offset some of these losses, domestic out-migration reached a 30-year high, driven by a combination of tax pressures and housing costs that average 2.5 times the national median.

In San Diego County, where median home prices exceed $900,000, public school districts reported a 4.2% drop in enrollment between 2023 and 2025, leading to consolidation plans in neighborhoods including City Heights and Logan Heights.

The trend reflects broader structural pressures in housing affordability, state fiscal policy, and interstate migration patterns that are reshaping regional economies across the Western United States.

California taxes residents on all income regardless of source, while part-year residents and nonresidents are taxed only on income earned within the state or derived from California sources such as employment, property, or real estate transactions.