Proposition 3 would permanently increase taxes in California; voters should inquire about the allocation of the funds generated.

Californians will cast their votes this November on a significant tax proposal known as Proposition 3, which has garnered widespread attention alongside the Proposition 40 “Billionaire Tax Act.” Proposition 3 aims to make permanent the state’s elevated income tax rates for high earners, a measure originally enacted as a temporary provision in 2012.

The initial approval of higher income tax rates in California marked a significant policy shift, with the state increasing marginal tax rates by one to three percentage points. When combined with an additional one percent surtax on incomes exceeding million, the effective top income tax rate reached 13.3 percent. In 2016, voters extended these rates through 2030, but failure of Proposition 3 would lead to a reversion of rates in 2031, reducing the top income tax rate to 10.3 percent for millionaires and 9.3 percent for other taxpayers.

Advocates of the higher tax rates often emphasize their role in funding public education in California. The original measure forecasted that the additional revenue would support public schools and community colleges, a promise that resonates with many voters.

However, there are compelling arguments against Proposition 3. Research suggests that the high-income tax bracket may ultimately prove economically detrimental to the state. Estimates from the Legislative Analyst’s Office project that Proposition 3 might generate between billion and billion annually. Yet, these projections do not fully consider the behavioral impact of tax rates on high earners. Historical data indicates significant outmigration among top income earners in response to previous tax hikes, particularly following the implementation of the federal Tax Cuts and Jobs Act in 2017, which capped federal deductions for state and local taxes. As a result, many of California’s wealthiest residents are now facing the full burden of the state’s tax rates, prompting concerns about further relocation and income reallocation.

Moreover, while proponents assert that the higher rates only affect the wealthiest 2% of taxpayers, the reality is that a significant number of other Californians may also encounter these rates throughout their lifetime. The threshold for the higher tax rates currently begins at approximately 1,000 for single filers and 2,000 for married couples filing jointly. This includes various forms of income, including capital gains from real estate sales, which could affect long-term homeowners and business owners who might be forced into higher tax brackets due to gains realized from selling their properties.

Lastly, even if Proposition 3 were to generate increased revenue, it does not guarantee improved resources for classrooms. Rising pension obligations, which have escalated considerably—totaling around billion by 2023—have absorbed much of the increased tax revenue. This trend indicates that without systemic changes to ensure that funds are directed toward enhancing educational outcomes, the additional revenue may largely contribute to the pensions and retirement benefits of school employees, rather than directly benefiting students.

Voters are urged to consider whether they want to maintain the current tax structure that could result in ongoing budgetary pressures on educational resources. Before they endorse changes that could have long-lasting implications for the state’s tax framework, Californians should seek clear answers on how Proposition 3 will positively impact both students and taxpayers alike.