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Proposition 30: temporary taxes to fund education

Molly Young | 10/17/2012, 5 p.m.

Proposition 30 is a tax measure supported by Gov. Jerry Brown, the California Democratic Party, the California League of Women Voters and the California State Sheriff's Association, and is an attempt to increase state revenue.

If passed, it will temporarily increase the state sales tax rate from 7.25 to 7.50 percent for four years and also temporarily increases personal income taxes for seven years for those who have taxable incomes over $250,000 annually. Those making more than $250,000 but less than $300,000 will be taxed at 10.3 percent. (Currently, only those with annual taxable incomes of more than $1 million are taxed at 10.3 percent). Those with taxable incomes of more than $300,000 but less than $500,000 will be taxed at a rate of 11.3 percent, and those with taxable incomes in excess of $500,000 will have a tax rate of 12.3 percent. If this proposition is passed in November 2012, the income tax will apply retroactively to all income earned or received since Jan. 1, 2012.

All Californians would be affected by the increase in the sales tax. The intention is to allocate 89 percent of this revenue to public schools, grades K-12, and 11 percent to community colleges.

The measure bars the use of funds for administration purposes, but does allow local school boards the discretion to decide (subject to annual audit) how the funds are to be spent.

According to the California Legislative Analyst's office, the revenue from Proposition 30's tax increases would go into the Education Protection Account. The proposition requires that funds in that account be spent on K-14 education. So, from an accounting perspective, all the funds raised from Proposition 30 would go to K-14 education.

However, because Proposition 30 would provide K-14 education with additional funding, the Legislature and governor could decrease the amount of other state funds going to K-14 education. The Legislature and governor could decide to spend these "freed up" state funds on other programs or to help balance the state budget.

The freed up funds, however, would not match dollar for dollar the new tax revenues from Prop. 30 because of the state's education finance system as governed by Proposition 98. Prop. 98 generally requires that if state tax revenue increases then spending on K-14 education must increase by a certain amount too. So a portion of the new revenue raised by Prop. 30 would have to go to K-14 education, while the remainder would be freed up for other programs.