California Voters to Choose Which Tax Proposals Will Pay for Schools on November 6

In November, California voters will decide on two not-so-different revenue raising ballot measures.  Proposition 30, backed by Governor Jerry Brown, temporarily raises income taxes on the state’s wealthiest taxpayers and increases the sales tax by a quarter cent.  The rival measure, Proposition 38, temporarily raises personal income tax rates on all taxable income upwards of about $50,000.  Californians can technically vote for both measures on the ballot, but even if both “win” only the one with the most votes will become law, so voters must choose carefully.

Both measures would raise billions of dollars in much needed revenue for education spending, primarily from the wealthiest Californians. An Institute on Taxation and Economic Policy (ITEP) analysis published by the California Budget Project found that the wealthiest one percent of Californians, with incomes averaging $532,000, would pay for close to 80 percent of the tax increase under Proposition 30 and around 45 percent under Proposition 38.  

As ITEP’s Meg Wiehe explained it to the San Francisco Chronicle recently, the big question for voters is not so much a tax fairness one but more about “’where do I want the money to go?  They both have very different end goals with the amount of money raised.”

California is one of a dozen or so states handicapped by a law that says a supermajority of lawmakers must approve of any tax changes. (Just as invoking the filibuster rule requires 60 votes to get anything done in the U.S. Senate, and we’ve all seen how well that works!) Facing a multi-billion dollar budget gap, Governor Jerry Brown first tried to raise revenues via the normal legislative process, but was stopped short of the two-thirds support needed. So he turned to the ballot process – and the people – to get the revenue increase the state needed.  The revenue from Proposition 30 would go into a new Education Protection Account in the state’s General Fund, increasing funding for K-12 and community colleges and freeing up other general fund dollars to address other spending priorities.  Importantly, Brown also built $6 billion of trigger cuts into his FY12-13 budget if Proposition 30 does not pass in November.  In other words, the governor’s budget was built on the premise that the revenue from his measure would be available and if it loses, naturally spending would have to be reduced by that amount mid-year.

All revenues from Proposition 38 would go directly to K-12 schools and only K-12 schools. None of the revenue could be spent on any other budget priorities since it can only supplement rather than supplant current spending on K-12 education; however, about a third of the funds can be used to reduce state debt. Even with the billions of dollars in new revenue Proposition 38 would bring to the Golden State, if it gets more votes than Proposition 30, $6 billion in spending cuts would automatically go into effect as per the Governor’s budget, forcing reductions in vital programs such as community colleges, universities, corrections and others. 

In large part due to this one striking difference between the two measures – that Proposition 30 would prevent devastating spending cuts and Proposition 38 would not – both the LA Times and the San Francisco Chronicle have endorsed Proposition 30.

It’s worth mentioning that some opponents of both measures have hauled out the millionaire migration canard, suggesting California’s wealthiest residents will flee if asked to pay higher taxes. But as ITEP’s Carl Davis explained to the Silicon Valley Mercury News, “There just isn’t any persuasive evidence out there to make you think that there would be a significant number of Californians moving because of this tax change.” In fact, the newspaper’s own analysis found that over the past 15 years, the share of the country’s ultra rich living in California has gone unchanged, even with a series of temporary tax increases and a new millionaire’s tax in 2004.

For more detail on who would pay for each of the ballot initiatives, ITEP’s analysis can be found in three California Budget Project reports: What Would Proposition 30 Mean for California?, What Would Proposition 38 Mean for California?, and How do Propositions 30 and 38 Compare?