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California’s education tax battle

Posted: September 21, 2012 2:00 a.m.
Updated: September 21, 2012 2:00 a.m.
 

This year’s California General Election will provide a tax-increase duel between Gov. Jerry Brown’s initiative, Proposition 30, and civil rights attorney Molly Munger’s initiative, Proposition 38.

Proponents of both initiatives claim to create funding for our public education system. To make matters more confusing, if both measures pass then the initiative with the highest number of votes will take effect.

As a voter, I wondered which one would help our ailing schools.

Here’s what I found:

Proposition 30 would raise state sales and use tax to 7.5 percent from 7.25 percent for four years. It would also create four high-income tax brackets for taxpayers with taxable incomes exceeding $250,000 and raise their taxes for seven years.

If this proposition is passed in November, the income tax will apply retroactively to all income earned or received since the first of the year.

The measure allocates temporary tax revenues of 89 percent to kindergarten-through-12th-grade schools and 11 percent to community colleges. It bars use of funds for administrative costs, but provides local school governing boards discretion to decide, in open meetings and subject to annual audit, how funds are to be spent.

Proposition 30 would add about $50 billion in additional state tax revenue. The estimate is $6 billion annually from 2012–13 through 2016–17. Smaller amounts of additional revenue would be available in 2011–12, 2017–18 and 2018–19 as the sales and use tax expires.

If it the measure passes, the sales tax will increase by more than $1 billion every year and will become the highest in the nation. Income tax for individuals and small businesses will increase by up to 32 percent.

Making such a large concession in tax increases should accompany reform, but Proposition 30 provides none. In fact, Proposition 30 doesn’t even guarantee that $1 of new funding will make it into the classroom.

The Wall Street Journal published an opinion piece on Sept. 8 titled, “California’s Pension Dodge,” and described Proposition 30 as, “Rather than saving taxpayers and schools, the tax increase will merely give political shelter to Sacramento’s free-spending politicians.”

I recommend a “no” vote.

Before voters approve any more taxes increases, we must demand that our government prove it is serious about meaningful reforms to the unsustainable state pension system, wasteful bureaucracy and spending programs.

On the other hand, Proposition 38 — aka the State Income Tax Increase to Support Education — would increase personal income tax rates on annual earnings more than $7,316 using a sliding scale from .4 percent for lowest individual earners to 2.2 percent for individuals earning more than $2.5 million and would last 12 years.

During the first four years, the measure would allocate 60 percent of revenues to K–12 schools, 30 percent to repaying state debt and 10 percent to early childhood programs. Thereafter, it would allocate 85 percent of revenue to K–12 schools and 15 percent to early childhood programs.

The measure provides K–12 funds on school-specific, per-pupil basis, subject to local control, audits and public input.

The estimated revenue would be about $120 billion from increases in state personal income tax revenues from 2013-24.

The income tax ramifications are significant. Income tax rates are raised on those making as little as $17,346 per year. Some individuals and small businesses would see their California income taxes increase by as much as 21 percent.

Even if the economy improves, voters would pay the income tax increase until 2024. In addition, the allocation of funds cannot be changed without another ballot initiative, even in cases of fraud, for 12 years.

The initiative does not require any accountability standards or educational reforms. In exchange for $120 billion in tax increases, voters should see a path forward to better results.

Proposition 38 is opposed by business groups around the state. In a rare bipartisan moments, both the California Democrat and Republican parties oppose it.

My recommended vote is “no.”

With an advertised title of “Our Children, Our Future,” voters expect the initiative to focus on providing “our children” with the best future possible. California was once the premier state for public education.

We can reclaim bright futures for our children through education reform and accountability. Our children deserve better and so do our overburdened taxpayers and businesses.

Alice Khosravy is a Santa Clarita Valley resident and small business owner.

 

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