This article presents an analysis of the combined effect of California and federal income taxes and their bearing on possible changes in other taxes. During the present period of continuing increase in the alleged demand for governmental services, many state and local budgets show marked expansion in planned current expenditures. To meet such expansion, increased revenues from new or existing taxes, subject to reservations, which can be ignored, are required. Changes in taxes to yield the increased revenues may be accompanied by other changes intended to reduce actual or supposed inequities in the existing tax structure. These proposed changes, whether increases or decreases in existing state and local taxes, are generally announced in terms of their apparent effect upon the taxpayer. According to the author he is not expressing opinions on the policy of expanding budget expenditures, or of making specific changes in any particular tax. The article is intended merely to bring out certain facts, which perhaps deserve attention in formulating tax policy.