California Proposition 38, State Income Tax Increase to Support Education (2012)

Under California’s personal income tax system, people with higher incomes pay a bigger percentage of tax on their income. State income tax rates range from 1% up to 9.3% for the highest income tax bracket. Personal income taxes are the largest source of revenue for the state’s General Fund, which provides most of California’s public school funding.

What Prop 38 would do if it passes:

  • Increase personal income tax rates on all but the lowest income tax bracket.
  • Tax rates would increase by 0.4% up to 2.2% depending on income tax bracket.
  • The highest income tax bracket would be at 11.5%.
  • This tax increase would end in 2024. Initially, 60% of the increased revenues would go to schools, 10% to early childhood programs, and 30% to state debt payments.
  • In 2015-16 and 2016-17, a higher share could be used for state debt payments, and after that, roughly 85% of the funds would go to schools and roughly 15% would go to early childhood programs.

Effect on the state budget:

  • Prop 38 would generate about $10 billion every year.
  • In the first few years, school districts would receive about $6 billion per year, and early childhood programs would receive about $1 billion per year, mainly for child care and preschool.
  • Until the end of 2016-17, the remaining $3 billion would be used to make payments on the state’s debts.

People for Prop 38 say (www.ourchildrenourfuture2012.com):

  • Prop 38 makes schools a priority again by guaranteeing to restore education funding.
  • Early childhood education is very underfunded,
and Prop 38 helps more students get the start they need to succeed.

People against Prop 38 say (www.stopthemiddleclasstaxhike.com):

  • Taxpayers would be locked into higher taxes until 2024, with very little accountability as to how the money is spent.
  • Under Prop 38 there are no requirements to improve school performance or get rid of bad teachers.
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