Provides Permanent Funding for Schools and Health Care by Extending Existing Tax on High Incomes
Makes permanent higher state income-tax rates on high-income taxpayers that otherwise would expire after 2030.
The measure would maintain an estimated $5 billion to $15 billion annually in state income-tax revenue. It would continue directing revenue to schools, community colleges, and, in specified circumstances, health care.
What it does
- Makes permanent the existing 10.3%, 11.3%, and 12.3% tax rates on taxable income above the inflation-adjusted high-income thresholds.
- Continues depositing the revenue from those higher rates into the Education Protection Account.
- Allocates 89% of education funding from the account to school districts, county offices of education, and charter schools, and 11% to community college districts.
- Allows up to $2 billion annually for specified health care services for children and families when account revenue exceeds amounts needed for school and community-college funding and the state workload budget.
- Bars education recipients from using the funds for administrator salaries, benefits, or other administrative costs, while requiring public spending decisions, online reporting, and annual audits.
Who it affects
- Taxpayers with taxable income above the inflation-adjusted thresholds for the higher rates.
- School districts, county offices of education, charter schools, and community college districts receiving account funds.
- Children and families receiving specified Medi-Cal-related health care services when excess account funds are allocated for health care.
Context
Current law applies the higher rates through taxable years beginning before January 1, 2031, with the provisions becoming inoperative on December 1, 2031. Current law already directs the related revenue to the Education Protection Account and sets its education and health care allocation rules.
A yes vote means
A yes vote would make permanent the existing higher income-tax rates on high-income taxpayers and continue the related funding rules for education and specified health care services.
A no vote means
A no vote would leave the higher income-tax rates scheduled to end after 2030 under current law.
Fiscal effect
The Legislative Analyst's Office estimates:
- Maintains $5 billion to $15 billion of annual state income tax revenue by making a temporary tax increase on high-income earners permanent instead of letting it expire in 2031.