The Question

Should the income tax rates on high earners that were passed by voters in 2012 and extended in 2016 be made permanent?

The Situation

In 2012 California voters passed Prop 30, creating new income tax brackets with higher tax rates.  This will only affect individuals with incomes over $371,000 a year. The income threshold is even higher for married couples and heads of households. Revenue from these higher taxes goes into the Education Protection Account and is distributed to K-12 schools and community colleges.  Some revenue also goes to the state’s General Fund for budget reserves and low-income healthcare.  In 2016 California voters extended these income tax rates through 2030.   

The Proposal

Prop 3 would make permanent the existing 2012 voter-approved tax rates for high-income Californians, currently set to expire in 2031.  It does not create any new taxes.

Fiscal Effects

Prop 3 would bring in between $5 Billion and $15 Billion each year.  The amount of money is hard to predict and will go up and down with the economy. Typically, about 40% of the revenue brought in by this measure would go to schools and community colleges. A smaller portion of the money would go to reserves to help the state balance its budget when the economy is weak. Money brought in under Prop 3 that does not go to schools, community colleges, or reserves could be used for other state programs, such as low-income healthcare.

Supporters Say

• Prop 3 merely extends the current tax rates on the wealthiest 2% of Californians.
• Prop 3 prevents billions in future cuts to our schools and healthcare.
• Prop 3 has accountability measures guaranteeing funds will go directly to local schools.

Opponents Say

• Prop 3 turns “temporary” taxes into permanent higher income taxes.
• California doesn’t have a revenue problem; we have a spending problem.
• Since 2012 our schools have gotten worse despite the increased revenue.