California voters will decide in November whether to make permanent the higher state income-tax rates currently scheduled to expire in 2031. Proposition 3, if passed, would extend tax rates on high-income earners that were approved by voters in 2012.
The measure applies to individuals with incomes exceeding a threshold currently set at $371,000, adjusted annually for inflation. The state estimates that making these rates permanent could preserve between $5 billion and $15 billion in annual tax revenue. The existing progressive income tax structure, where rates increase with income, would not change for lower brackets. The core question before voters is whether the higher rates applied to top earners should continue beyond their 2031 expiration.
Supporters of Proposition 3 argue that maintaining this revenue is crucial for funding public services, including education and healthcare. David Goldberg, president of the California Teachers Association, stated that the potential expiration of these rates could lead to significant cuts in services for students, families, and the general fund. The measure directs its revenue towards public education, with 89% allocated to K–12 schools and 11% to community colleges, while also bolstering General Fund resources for healthcare and reserves.
Proponents characterize Proposition 3 as an extension of an existing tax rather than a new imposition on taxpayers outside the affected income brackets. However, opponents contend that the measure would permanently lock in higher tax rates at a time when California already collects substantial revenue from its highest earners. Jon Coupal, president of the Howard Jarvis Taxpayers Association, questioned the necessity of extending these rates and suggested potential broader economic consequences.
Voters will also consider Proposition 40 on the November ballot, a separate measure that would impose a one-time 5% tax on certain taxpayers and trusts with over $1 billion in covered assets. Unlike Proposition 3, which deals with income and extends existing rates, Proposition 40 targets accumulated wealth with a single levy. The state's fiscal analysis suggests Proposition 40 could generate tens of billions of dollars over several years and potentially reduce state income-tax collections from billionaires. The two measures have also drawn different political alignments, with Xavier Becerra, a candidate for governor, supporting Proposition 3 while opposing Proposition 40. Both measures are scheduled for a vote on November 3.