Voters will have to take their pick from two different tax initiatives for education that are slated to appear on this November’s ballot.
The two initiatives — Proposition 30 (the governor’s tax initiative) and Proposition 38 (Molly Munger’s tax initiative) — will affect taxpayers, public schools and universities, and local government programs in a variety of ways, making it crucial for voters to know exactly what each proposition entails.
Both initiatives have a common goal of raising funds for schools and other government programs, but go about generating these revenues in different ways.
Proposition 30, otherwise known as the governor’s tax initiative, would increase the California sales tax rate by one-quarter cent for every dollar for four years, and would raise the personal income tax for people with incomes of $250,000 or more for seven years.
This increase in state sales tax and personal income tax would generate about $6 billion per year between 2012-13 and 2016-17. The generated funds would support the state’s 2012-13 budget plan and would assist in balancing the budget throughout the next seven years.
The state’s 2012-13 budget plan assumes that voters approve Proposition 30 and allocates the potential funds to numerous state programs. Most of the generated revenues would go toward schools and community colleges.
If Proposition 30 does not pass, personal income taxes and state sales tax would not increase and spending reductions would take place during the 2012-13 year. This would mean that the University of California and California State University systems would each receive $250 million in “trigger cuts,” and other programs such as Cal Fire and the Department of Developmental Services would face reductions as well. In total, $5.951 billion would be decreased from state funding if voters reject Proposition 30.
In summary, a “yes” vote on Proposition 30 means that state sales tax would be temporarily increased for everyone and personal income taxes would be raised for people making $250,000 or more, and the resulting revenues would fund programs in the state budget. A “no” vote would not increase personal income taxes and state sales tax, and state spending cuts would take place in 2012-13.
Supporters of this initiative include the University of California Board of Regents. Members of the board voted to endorse this proposition during their bimonthly meeting on July 18, saying that this measure was one of the university’s only options to avoid a steep, mid-year tuition increase for students and to protect the quality of the school.
Opponents of Proposition 30 include members of the Howard Jarvis Taxpayers Association and the Small Business Action Committee. Arguments against this initiative say that there is no guarantee in the way it is written that this initiative would fund schools, and some also say that this could harm small businesses.
On the other hand, Proposition 38, or Molly Munger’s tax initiative, would temporarily raise personal income taxes for the majority of California taxpayers. The generated funds from this increase would go toward state debt payments, public schools, preschools and other child care programs.
Instead of just increasing the personal income taxes of people who make $250,000 or more as Proposition 30 does, Proposition 38 would raise the personal income taxes of everyone, except for people in the lowest income bracket. This would be effective for a 12-year period.
The revenues generated from this tax increase would be given to the newly created California Education Trust Fund (CETF), which would be used exclusively for three purposes. Sixty percent of the money would fund schools, 10 percent would fund early childhood education programs and the remaining 30 percent would be to make state debt payments.
The proposition states that around $10 billion would be raised in additional state revenues from this initiative beginning in 2013-14, but that only half this amount be raised in 2012-13. The proposition predicts that the revenue would tend to grow over time, but that the amounts earned in one year could be much higher or lower than the previous year. This is due to the fact that the initiative raises the taxes more for upper-income people, and the income of these individuals tends to swing more often due to housing prices, changes in the stock market and other investments.
Some of the main supporters of this initiative are Molly Munger, an attorney who lives in Pasadena, and the California State Parent Teacher Association (PTA). They believe this measure is what it takes to restore better quality in K-12 schools.
Main opponents include Gov. Jerry Brown and the California Business Roundtable. Brown argues that this initiative will not improve California’s overall multibillion-dollar budget deficit because it earmarks the money it would generate for education.
A “yes” vote on Proposition 38 would increase state personal income taxes for 12 years in order to fund schools, preschools, child care and state debt payments. A “no” vote would mean that state personal income taxes would remain at their current levels and there would not be any additional funding for schools, preschools, child care and state debt payments.
In the case that voters approve both Proposition 30 and 38, only one set of tax increases would go into effect and the measure with more “yes” votes would prevail.