Susan Shelley: California taxpayers get fleeced by fraudsters and politicians

California residents pay very high taxes as the evidence piles up that an insane amount of the money is stolen by fraudsters. 

For 2025, even single filers with a taxable income of less than $11,079 owe 1% of their income to the state. Then it’s 2% for those who have earned up to $26,264, 4% up to $41,452, 6% up to $57,542, and 8% up to $72,724. Why does California have a soak-the-rich state tax rate on an income that is too low to qualify for a mortgage to buy a median-priced house?

And it just gets worse from there. If you earn a taxable income between $72,724 and $371,479, you owe the state 9.3% of your income in taxes. Up to $445,771, you’ll pay 10.3%. Up to $742,953, the hit is 11.3%. Between $742,953 and $1 million, the state grabs 12.3%. Over $1 million there’s an add-on that brings your state income tax rate to 13.3%.

If you sell your longtime family home, now worth some crazy multiple of what you paid for it partly because the value of money has been inflated away, California taxes your capital gain at the same rate as ordinary income. The nominal profit on the sale of your home, with no adjustment for inflation, has made you one of “the rich” for exactly one tax year.

Californians also pay the highest state sales tax rate in the country at 7.25%. Unlike the income tax, which takes the largest percentage from the highest incomes, the sales tax takes the highest percentage of the lowest incomes.

But where does that money go?

Every day there’s more evidence that a staggering amount of your money is being stolen by fraudsters milking the state’s generous benefit programs, especially the healthcare benefit programs, while California consistently fails to do the basic verification and vetting that would prevent out-of-control fraud.

Earlier this month, the U.S. Centers for Medicare & Medicaid Services and the Department of Justice announced a new focus on what has been called “program integrity issues” in the business of hospice care.

Medicare and Medicaid chief Dr. Mehmet Oz put it more plainly. “Money is being sucked out of the system by these fraudsters,” he said.

This week, Oz posted a video to social media pointing out hospice centers in Van Nuys that he said were run by organized international criminal gangs that pay crooked doctors to fraudulently prescribe hospice services or bill for services that are never provided. While this is not entirely new information – the California State Auditor reported in 2022 that indicators of massive fraud included the 210 active hospice agencies within 1 mile of each other in Van Nuys and a 1,600% increase in the number of hospice agencies in Los Angeles County in 12 years – Oz said not enough has been done about it.

First Assistant U.S. Attorney Bill Essayli told CBS News in Los Angeles his office is “building a team to aggressively look at fraud investigations” because “no one is making sure the money is actually being used where it’s intended to be used.”

In California more than one-third of the population – nearly 15 million people – is on Medi-Cal, the safety-net health care program for low-income residents. The cost of the program in 2025-26 is estimated to be $197 billion. The federal government pays a little more than half, but the state is on the hook for the rest. Medi-Cal accounts for about 15 percent of General Fund expenditures annually, the second biggest expense after education.

How much of that spending is stolen through fraud?

“Eighteen percent of the whole country’s home health care billing is coming out of Los Angeles County,” Oz said. “How is that possible?” 

Congressional leaders are trying to find out. On January 9, two House committees asked for a briefing from the inspector general of the Department of Health and Human Services about the evidence suggesting “large-scale Medicare fraud involving home health agencies and hospice agencies in Los Angeles County.”

California taxpayers are fleeced twice, paying both state and federal taxes to support fraudsters in the style to which they’ve become accustomed. Some of them should be voted out of office.

Write Susan@SusanShelley.com and follow her on X @Susan_Shelley