Proposition 38: NEUTRAL

Twelve-Year Personal Income Tax Increase To Raise Approximately $10 Billion/Year For K-12 Schools And Early Childhood Programs

Proposition 38 would raise personal income tax rates across the board, beginning at a 0.4% increase starting at $7,316 of income and topping out at a 2.2% increase above $2.5 million of income, with funds directed to K-12 education. (Note: this does not mean that the amount of income taxes one pays would go up 0.4 - 2.2%, but that one's tax rate would go up by that percentage, depending on income.  California's current regressive income tax rate is 9.3% for all income over $23,950). Unlike Proposition 30, Proposition 38 focuses on income taxes, and does not increase the highly regressive state sales and use tax. Moreover, its proponents assert that many of the state’s lowest income earners would see no net increase in their tax payments under Proposition 38 due to of an array of available federal subsidies and deductions. The revenues generated by Proposition 38 would be allocated exclusively to K-12 education, producing $10-11 billion per fiscal year for 12 years.

In terms of a political calculus, the governor and a broad coalition of progressive organizations and unions are united in their support of Proposition 30. By contrast, there is much discord about Proposition 38. The governor and those same groups are either opposing (including the California Democratic Party and SEIU) or taking no position (including the ACLU of Southern California) on Proposition 38 because they believe that supporting both propositions will confuse the electorate and take the focus off of the real budget disaster that will occur if Proposition 30 fails. On the other hand, many other organizations with whom Bend the Arc typically finds common cause, such as the California PTA and the ACLU of Northern California, are urging support of both Propositions 30 and 38 in order to avoid the “worst case” scenario, in hopes that at least one of them will succeed. These strategic differences stem from the fact that if both measures prevail at the ballot box (i.e., they each receive at least 50 percent plus one of all votes cast), only the initiative garnering the greatest number of “yes” votes will go into effect. 

Bend the Arc recognizes the devastation wrought by years of multi-billion dollar budget cuts that have dramatically impacted core services and education funding. We also recognize how unacceptable it is that California ranks 47th out of 50 states in per-pupil education spending, and is dead last—50th out of 50 states—with the largest class sizes in the nation. However, as an organization that advocates for tax fairness and passionately promotes a broad platform of economic opportunity and social justice, we believe that Proposition 30 is better public policy.       

In yet another example of ballot box budgeting, Proposition 38 proposes to change tax policy and direct tens of billions in state spending outside of the legislative process and to only one element of our public infrastructure. Proposition 38 would completely wall off its funding and prohibit any changes to the distribution of funds or the formulas that govern this distribution. Bend the Arc believes that complex, multi-billion dollar spending is best authorized through the legislative process. Due to these reservations and in light of our strong and unequivocal preference for Proposition 30, Bend the Arc takes a NEUTRAL position on Proposition 38, despite the fact that this initiative would provide much-needed education funding.

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