Proposition 55 has recently become a topic of heated conversation. What has been uncovered in recent months is that the wealthiest Californians are paying significantly higher income tax rates than what was approved by voters in 2012. The current rates are set to expire, which led to a partnership of teacher and service worker unions, medical groups and other related groups lobbying for Proposition 55. This a ballot measure that would extend higher taxes on the highest earners in California through 2030.
If voters support Proposition 55, the state will use the tax dollars of the wealthiest Californians to support a large percentage of schools, parks, road repairs, police, prisons and other government services. The higher tax burden is in effect for single filers earning $263,000 or more annually and families making more than $526,000. These taxpayers paid almost $34 billion in income taxes in 2014, which equates to nearly a third of all state general fund revenue.
California’s Governor, Jerry Brown has been confronted with this discrepancy and he has noted that the states funding varies greatly depending upon the “booms and busts” in the state economy. While taxpayers of all level understand that balancing the California budget is a challenge, many are asking why those at the top are paying a significantly higher percentage of their earning to support state sponsored government budgets.
Governor Brown has publicly argued in favor of Proposition 55, positioning that if the proposition is voted down, the state would have a budget deficit as quickly as the next three years. The unfortunate outcome might be cuts in education, health and social services programs.
The history of California’s tax propositions dates back a number of years when the state was in a constant state of budget crisis. Proposition 30 proposed a tax rate increase from 1 to 3 percent for the wealthiest Californians. In 2012, when Gov. Brown introduced this measure, he argued that it was necessary to protect the state budget and state sponsored infrastructure. Under Prop 30, the tax rate is 10.3 percent for single filers earning between $263,000 and $316,000 in annual taxable income, 11.3 percent for those between $316,000 and $526,000, 12.3 percent for those between $526,000 and $1 million and 13.3 percent for those earning $1 million or more.
Proposition 55 maintains the same income tax regulations, but has some noteworthy differences from the old proposition. Prop 55 does not extend the 25-cent sales tax hike, which expires at the end of 2016. If passed, it will raise $4 billion to $9 billion a year, depending on the economy and stock market.
It is unsure what will happen when Proposition 55 falls into the hands of California voters, but what is known is that there are mixed reviews on the equity of this new measure.
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