2012 California Ballot “It’s About Taxes, Stupid!”

Prop 30 vs. Prop 38: One spearheaded by California’s biggest political heavyweight –Governor Jerry Brown, the other by insurgent “high wealth” activist Molly Munger. Both California ballot initiatives raise taxes. Brown’ s Prop 30 would increase the state sales tax by ¼ cent through the end of 2016 and increase income taxes for those earning over $250,000 through 2018. Munger’s Prop 38 is an across the board permanent income tax increase starting with those earning $ 7,316 per year. But, the measure also creates new early education programs for low income families and earmarks new tax revenues specifically for education.

If they both pass, the highest vote getter prevails. If they both fail, the Governor promised significant budget cuts. Many believe that if Democrats can win veto-proof 2/3rd majorities in both the Senate and the Assembly that the Legislature will increase taxes on its own – bypassing Brown’s pledge not to raise taxes without a vote of the people.

In order to appreciate the importance of these two measures, voters must recall that in 2011, several programs were transferred from the state to local governments, including certain prison, parole and substance abuse treatment programs. In order for local governments to afford running these programs, the state also allocated $6 billion in revenues received from sales tax.

At the same time, the state is obligated by Prop 98 to provide a minimum level of funding to schools. In order to not run afoul of that requirement, Gov. Brown has proposed an increase in the sales tax and a millionaire’s tax. Critics argue that this money will circumvent schools and be deposited in the to-be-created Education Protection Account, leaving an uncertainty as to whether or not schools would ever see any money at all.

The Munger alternative to the funding shortfall is to establish a graduated income tax. Under this plan, taxpayers would pay anywhere from an additional 0.4% to 2.2% depending on income. The funds raised from this tax would go directly to public schools, child-care, preschool programs, and state debt payments.

Both plans aspire to raise more money than is actually mandated under Prop 98 and both contain provisions that require surplus funds to help balance the State debt. Additionally, both plans are mere projections and could fall drastically short depending upon California’s economic health. Prop 30 relies on a healthy consumer base, while Prop 38 relies on a healthy employment environment in order to succeed. Neither plan is a permanent measure, so the only thing that’s certain is that this isn’t the last voters have heard on the issue of education funding.