This high-income tax was pitched as ‘temporary.’ California voters can ensure it stays that way

An income tax on California’s highest earners, first passed in 2012, will expire in five years unless voters make the levy for school funding permanent. Below, an anti-tax advocate argues California’s pattern of making temporary taxes permanent is bad policy, and voters can break the cycle. The opposing view: A cafeteria manager says students and families will be hit hardest if Proposition 3 fails.

For more than a century, California’s tax system has followed a familiar pattern: A fiscal crisis emerges, government responds with a “temporary” tax increase, the crisis passes and the tax remains.

Proposition 3 would continue this troubling pattern by making a “temporary” tax increase permanent.

Supporters of Prop. 3 argue that the measure will provide ongoing funding for two priorities of most Californians, education and healthcare. The question is not whether those services matter — clearly, they do — but whether it is a sound policy to permanently extend tax hikes that voters were repeatedly told would expire.

When California voters approved higher personal income tax rates in 2012, they were told the increase was a short-term emergency response to a specific fiscal challenge. Four years later, voters were asked to extend the tax increases, again for a limited time.

Prop. 3 would make the tax hikes permanent — during a year in which high taxes and the unaffordable cost of living are the biggest problems for the majority of Californians. A recent poll by the Public Policy Institute of California found that roughly half of Californians say the cost of living is their top concern, and 55% prefer lower taxes and fewer government services.

The reason that “temporary” tax hikes rarely disappear is that once government adjusts its spending to the higher revenue, politicians and special interests treat this as the new baseline.

It doesn’t have to be this way. By rejecting Prop. 3, California voters can break the tradition and make sure that a temporary tax truly is temporary.

It is worth noting that California’s new state budget establishes record-high education spending of $27,418 per pupil, up 27% from just five years earlier. Public schools continue to be the state’s top priority, receiving roughly 46% of the state’s general fund budget.

Additionally, the entire budget reached a record high of $351.7 billion in spending, an $89 billion increase in spending (34%) from five years ago.

In other words, any fiscal emergency of the past has been addressed.

Supporters characterize Prop. 3 as affecting only high-income taxpayers, but it is not that simple. California’s tax system does not neatly separate business income from personal income, and many small businesses operate as sole proprietorships, partnerships and S corporations, reporting business earnings on personal income tax returns. As a result, extending higher tax rates would sustain higher costs for many small businesses — ultimately resulting in higher prices for their customers.

The broader economic effects deserve scrutiny, as well. California already imposes the nation’s highest personal income taxes and has the highest state sales tax rate and gas tax. The state applies an additional 1.3% tax on all wage income to pay for the State Disability Insurance program.

In addition to keeping costs high in California, Prop. 3 would deepen California’s reliance on the state’s most volatile revenue source: taxes paid by high-income earners. During economic expansions, revenue surges. During downturns, revenue can fall dramatically, leaving the state struggling to pay ongoing expenses — especially when the demand for public services is increasing.

Expanding permanent spending commitments tied to the most volatile revenue stream reduces flexibility when the economy weakens.

Education and healthcare deserve stable funding. But stable funding should rest on honest budgeting and prioritizing the ample resources already available — not on repeatedly extending taxes that voters were assured would expire.