This proposition would increase the personal income tax rates for everyone in California who earns more than $7,316 a year for 12 years (2013 through 2024). The tax scale would range from 0.4 percent for low-income individual earners, and increase to 2.2 percent for individuals earning more than $2.5 million

For those filing joint returns, an additional 0.7 percent tax rate would be imposed on those earning between ($34,692 and $54,754, which would increase their total rate to 4.7 percent). The increase would be an additional 1.1 percent for those with incomes between $54,754 and $76,008, increasing their total tax to 7.1 percent).

For the first four years, 60 percent of the revenue would go to K-12 schools, 30 percent to repaying state debt, and 15 percent would go to early childhood programs.

After four years, 85 percent of revenues would be allocated to K-12, and 15 percent to early childhood programs. The measure would also provide K-12 schools funds for school-specific, per pupil basis which would be subject to local control, audits, and public input. It would also prohibit the state from directing new funds.

The money raised would be put into a newly created California Education Trust Fund (CETF), which would be dedicated to three purposes–60 percent would go to schools, 10 percent would go to early childhood care (ECE) programs and 30 percent would go to make state debt payments. Of the 60 percent for schools, 70 percent of that money would be distributed to various schools, based on the number of students and the students’ grades; 18 percent would go to low-income students (determined by the number of students eligible for free school meals); 12 percent would go to training school staff, purchasing up-to-date technology and teaching materials.Prop. 38 also underwrites more preschool openings to children from low-income families as well as new programs for infants and toddler. (birth to 3 years old), and family support services, which could include home visits from staff for assessments of child development, family literacy and parent/caregiver training.

The annual tax revenue expected from this measure would be approximately $10 billion.
As a tax increase proposition, this measure is similar to Prop. 30, and is thought by many to compete with it. In the event that both measures pass, the measure receiving the highest number of votes would be the one implemented, as per the California state constitution.

Only one set of tax increases goes into effect. Prop. 30 and Proposition 38 both contain sections intended to clarify which provisions are to become effective if both measures pass.