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Proposition 3 asks California voters whether to make permanent a temporary income tax on the state’s highest earners to help fund education.
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The tax was first approved by voters in 2012 and extended in 2016. But it is set to expire in 2031. It typically generates between $5 billion and $15 billion annually. Supporters say making the tax permanent would protect a critical source of funding for schools. Opponents say voters were promised a temporary tax and the state should let it expire.
The higher rates apply only to the top 2% of California taxpayers. According to the Legislative Analyst’s Office, that affects , though the thresholds increase annually with inflation.
California Teachers Association President David Goldberg said California’s reliance on income taxes to fund public education makes school funding vulnerable to large swings from year to year. Making the higher tax on California’s top earners permanent would provide more stability for schools, he said.
The revenue from the higher rates now form a core component of the state budget, according to the California Budget & Policy Center.
“There’s a lesson we’ve learned by passing it — this will be the third iteration. The need to have it be permanent is made clear by the fiscal cliff that we face every time it gets close to sunsetting,” Goldberg said.
David Kline with the California Taxpayers Association, which opposes Prop. 3, argued that making the tax permanent could actually contribute to instability in school funding. Because the state budget relies heavily on income taxes paid by high earners, Kline said California risks losing a significant source of revenue if those taxpayers choose to move elsewhere.
Pointing to other proposed taxes on high earners, including the billionaire tax, Kline said, “We have to be careful about killing the goose that lays the golden eggs.”
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The two sides fundamentally disagree on whether Prop. 3 represents another tax on wealthy Californians or simply a continuation of the status quo. Supporters say allowing the rates to expire would amount to a tax cut for the state’s highest earners.
Kline said that if Californians want to keep education a top priority, lawmakers should reflect that in the existing state budget.
California is already constitutionally required to provide a minimum level of funding for public schools and community colleges, which often amounts to about 40% of the state’s General Fund.
Because revenue from the higher income tax helps the state meet that requirement, allowing the tax to expire could force lawmakers to draw more heavily from other General Fund dollars, putting greater pressure on funding for services such as healthcare and housing.
For opponents, the debate also comes down to whether a tax originally presented to voters as temporary should become permanent. Kline said the fiscal emergency that prompted voters to approve the higher rates in 2012 has passed. He argued lawmakers should allow them to expire as promised.
Goldberg countered that voters have the opportunity to decide again whether the higher rates should continue. He said repeatedly approaching an expiration date creates too much uncertainty for school funding.
“It still does not give us anywhere near what students deserve or what educators and families and communities deserve,” Goldberg said. “But at least we’ll stabilize.”
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