Given last week’s discussion and a blog post on Prop 13, I thought this might be of relevance.
Gov. Brown in 2012, campaigning for Prop 30 - LA Times
Background: Prop 30 (titled Temporary Taxes to Fund Education) was passed in 2012 by CA voters on the ballot. In order to prevent significant education budget cuts, it called for both a 7 year personal income tax increase for residents with over $250k income and a statewide sales tax increase by .25% until 2016. It was estimated to bring in over $6 billion in additional tax revenue, which would then be used to fund public education.
Article: Activists are currently trying to campaign for Prop 30 extensions; one such campaign backs the “Invest in California’s Children Act,” which would make the personal income tax increase permanent, while increasing taxes for $2+ million household earners. Governor Brown, who ardently campaigned for Prop 30 in 2012, has repeatedly stated that the tax increases were meant to be temporary (hence Prop 30’s title), and has not come out in support of such initiatives as of yet. The estimated tax revenue is estimated to be around $10 billion.
Another such campaign supports the “School Funding and Budget Stability Act,” which would extend the increased income taxes until 2030 and not raise taxes on households earning more than $2 million.
Arguments against such tax hikes include fears of scaring away millionaires and business owners due to CA’s high taxes – CA had the highest sales tax rate in the nation, according to a 2013 study from Tax Foundation, and a 13.3% income tax rate for $1 million earners, also the highest in the nation.
So what to do? Increase education funds through higher taxes? Is this the only viable way to increase the quality of CA’s school systems? Do these two proposed initiatives seem sound, or is more compromise necessary? If you were a top earner, what would your incentive be to stay in California as opposed to moving to Texas, where the income tax rate is 0% and other taxes in general are much lower?
Tax Foundation Study 2013