Prop. 3 asks voters to make California's top-bracket income tax permanent, a decade-old levy that mainly pays for schools

Californians are being asked for a third time about an income tax on the state's highest earners, and if Proposition 3 passes on Nov. 3, it would be the last time.

The tax began as a temporary measure approved by voters in 2012 to help schools recover from the Great Recession, and voters extended it in 2016. It is now set to expire in 2031. Prop. 3 would make it permanent, CalMatters reported in a story published Wednesday by the Pleasanton Weekly.

Who pays and where the money goes

The tax applies to individuals with income above $371,000 and couples above $743,000. Its yield has swung from about $5 billion to $15 billion annually, since the incomes it taxes track markets, interest rates and similar factors.

If the measure passes, those earners would keep paying a 12.3% top rate. Combined with the state's separate 1% surcharge on income above $1 million that funds mental health services, the top rate stays at 13.3%, which CalMatters says is the highest in the country.

Most of the revenue flows through Proposition 98, the formula that guarantees roughly 40% of the state budget to public schools and community colleges, with any amount above a set level going into a rainy day fund. The Legislative Analyst's Office says the tax also frees up other state money for health care and services.

In strong years the tax covers about 15% of the K-12 budget.

The two sides

The California Teachers Association is the main backer. President David Goldberg called the measure "vital for our schools" and said districts could lay off as many as 50,000 teachers if it fails. The yes campaign has collected over $40 million, against $5,500 on the opposing side, who include taxpayer associations.

Goldberg said the union put it on the ballot years before the 2031 expiration because districts budget far ahead.

Susan Shelley, a vice president at the Howard Jarvis Taxpayers Association, said falling enrollment and the state's recent spending raise doubts that schools need additional funding. "We have fewer and fewer students. Does this mean we need fewer teachers?

Maybe it does," she said. She also argued that higher taxes push wealthy residents out of state; according to the analyst's office, roughly half of state income tax revenue comes from the top 2% of earners.

Rob Manwaring of the advocacy group Children Now pointed to California's student-teacher ratio, about 22 to 1 in 2022-23 against a national average of 15 to 1, as a reason schools need the money.

In a September survey by the Public Policy Institute of California, 58% of likely voters said they intended to vote yes.

Prop. 3 is separate from Proposition 40, the one-time 5% tax on billionaires' assets also on the ballot. The teachers union is not campaigning against Prop. 40 but is focusing on Prop. 3, Goldberg said.

Sources

pleasantonweekly.com