Proposition 30, a Sales and Income Tax Increase Initiative, is on the November 6, 2012 ballot in California as an initiated constitutional amendment. The Proposition will hike income taxes and the California sales tax. A portion of the new revenues would be used to support higher school funding, with the remainder helping to balance the state budget. Schools and community colleges could use these funds for any educational purpose including pensions.
Provisions of Proposition 30 include:
- Raises California’s sales tax to 7.5% from 7.25%, a 3.45% percentage increase over current law. (Under the Brown Tax Hike, the sales tax would have increased to 7.75%)
- Creates four high-income tax brackets for taxpayers with taxable incomes exceeding $250,000, $300,000, $500,000 and $1,000,000. This increased tax will be in effect for 7 years.
- Imposes a 10.3% tax rate on taxable income over $250,000 but less than $300,000–a percentage increase of 10.6% over current policy of 9.3%. The 10.3% income tax rate is currently only paid by taxpayers with over $1,000,000 in taxable income.
- Imposes an 11.3% tax rate on taxable income over $300,000 but less than $500,000–a percentage increase of 21.5% over current policy of 9.3%.
- Imposes a 12.3% tax rate on taxable income over $500,000 up to $1,000,000–a percentage increase of 32.26% over current policy of 9.3%.
- Imposes a 13.3% tax rate on taxable income over $1,000,000–a percentage increase of 29.13% over current “millionaires tax” policy of 10.3%.
- If this proposition is passed in November, 2012, the income tax will apply retroactively to all income earned or received since the first of the year (1 January, 2012).
If Proposition 30 is approved, it will change the California Constitution. It will do this by adding a proposed new Section 36 to Article XIII of the California Constitution.
Arguments in favor
The arguments presented in favor of Proposition 30 in the state’s official voter guide include:
- “Without Prop. 30, our schools and colleges face an additional $6 billion in devastating cuts this year. Prop. 30 is the only initiative that prevents those cuts and provides billions in new funding for our schools starting this year—money that can be spent on smaller class sizes, up-to-date textbooks and rehiring teachers.”
- “Prop. 30 balances our budget and helps pay down California’s debt—built up by years of gimmicks and borrowing. It is a critical step in stopping the budget shortfalls that plague California.”
- “To protect schools and safety, Prop. 30 temporarily increases personal income taxes on the highest earners—couples with incomes over $500,000 a year—and establishes the sales tax at a rate lower than it was last year. Prop. 30’s taxes are temporary, balanced and necessary to protect schools and safety.”
- “Only highest-income earners pay more income tax: Prop. 30 asks those who earn the most to temporarily pay more income taxes. Couples earning below $500,000 a year will pay no additional income taxes.”
- “All new revenue is temporary: Prop. 30’s taxes are temporary, and this initiative cannot be modified without a vote of the people. The very highest earners will pay more for seven years. The sales tax provision will be in effect for four years.”
The arguments in opposition to Proposition 30 presented in the state’s official voter guide include:
- There is no guarantee in the way it is written that the money would be used for schools. Thus, opponents say, it is a “$50 million shell game.” To buttress this argument, opponents quote the California School Boards Association, which in May 2012 said, “the Governor’s initiative does not provide new funding for schools.”
- “Nothing in Prop 30 reforms our education system to cut waste, eliminate bureaucracy or cut administrative overhead.”
- Instead of supporting education, the new tax money raised by Proposition 30 will really go to “backfill the insolvent teacher’s pension fund.”
- “The Governor, politicians and special interests behind Proposition 30 threaten voters. They say ‘vote for our massive tax increase or we’ll take it out on schools,’ but at the same time, they refuse to reform the education or pension systems to save money.”
- “Politicians would rather raise taxes instead of streamlining thousands of state-funded programs…look at what they just did: politicians authorized nearly $5 billion in California bonds for the ‘bullet train to nowhere’, costing taxpayers $380 million a year. Let’s use those dollars for schools! Instead, the politicians gave us a false choice — raise sales taxes by $1 billion per year and raise income taxes on small businesses OR cut schools.”
Other arguments that have been made against Proposition 30 include:
- The Howard Jarvis Taxpayers Association conducted a “Don’t Sign the Petition” campaign, urging people to decline to sign the petition. On their website devoted to encouraging people not to sign the petition, they said, “Petition gatherers may tell you their measure is to increase school funding. But simply put, It’s a Tax Increase! California is already a poorly managed state. We have a $15 billion budget deficit – a result of overspending – $500 billion in unfunded pension liabilities, a tax and regulatory climate that drives businesses away, wasteful and ineffective use of our tax dollars and a political system unduly influenced by special interests. We do NOT need higher taxes. Join us by telling everyone you know not to sign Jerry Brown’s tax initiative.”
- The income tax will be retroactive back to the first of the year (2012), a fundamentally unfair ploy that would not be tolerated if it happened to you as an individual.
- California is already a very high tax state. We already have the 2nd highest state income tax rate, as well as THE highest state sales tax rate.
- If approved, CA will be by far #1 in income tax rates. We will be 21% higher than the 2nd highest state (Hawaii), 34% higher than the 3rd highest state (Oregon), and FAR higher than all the rest – including seven states with zero state income tax. Tables 11 and 13
- Proposition 30 is opposed by columnist Debra Saunders, who says, “I fear [it will] drive golden geese out of the state. Sure, most families earning $500,000 or more aren’t going to move over a lousy $5,000, but moguls who make 20 times that and own multiple homes just might decide to migrate. And there go all their tax dollars.”
- Some people who generally support tax increases in California say that they have problems with the specifics of Proposition 30. An example of this is Molly Munger, who says, “You sort of hope that the Democrats are the party that stand up for investment in children and in education. Those are two bedrock principles of the Democratic Party. It is a little bit ironic that so many elements of the Democratic Party are, you know, supporting an initiative that does not invest in the main engine we have for social mobility and opportunity in our society, which is our K-12 schools.” Another example is columnist George Skelton, who says, “Brown wants voters to believe that all the billions raised by his tax hike would go to K-12 schools and community colleges. They won’t. And he knows that as well as anyone.”
- Molly Munger has additionally said, “Under our proposal, virtually all the cuts that the schools have suffered in the last four years would all be restored—and under the governor’s initiative, virtually none would be.”
- Jerry Brown
- League of Women Voters of California
- California Democratic Party
- California Teachers Association (CTA)
- California State Council of Service Employees (SEIU)
- California School Employees Association (CSEA)
- American Federation of Teachers (AFT)
- California Federation of Teachers (CFT)
- Jon Coupal. Coupal is the head of the Howard Jarvis Taxpayers Association.
- Tom Bogetich. Bogetich has retired from the position of executive director of the California State Board of Education.
- Doug Boyd. Boyd is a member of the Los Angeles County Board of Education.
- Joel Fox. Fox is the president of the Small Business Action Committee.
- John Kabateck. Kabateck is the executive director of the California branch of the National Federation of Independent Business.
- Kenneth Payne. Payne is the president of the Sacramento Taxpayers Association.