In the midst of the 18 California ballot propositions, including the highly publicized marijuana legalization and death penalty measures, lurked Proposition 55. This proposition is an extension of the temporary personal income tax approved in 2012 on annual earnings for individuals, over $250,000 and for couples, $500,000. Instead of its scheduled end in 2018, the tax will continue until 2030.
With its target income bracket, this tax hits many families in Saratoga but veils itself in the Good Samaritan guise of increasing revenue for K-12 education. Unsurprisingly, an overwhelming majority — approximately 62 percent — of Californians voted to pass the proposition.
Its passage is an unfortunate example of a powerful majority making financial decisions for the minority, in this case the often unsympathetically portrayed wealthy. The state government must decide on taxation that only applies to a portion of the population, wealthy or not, by itself rather than putting it to a majority vote.
Propositions, especially related to taxing the rich, will always be supported by those making below the $250,000 bracket, because they know they can reap the benefits without having their own tax payout increased. This proposition begins to cross the delicate balance between taking advantage of the wealthy and making the wealthy pay for their fair share.
Of course, increasing taxes has always been a necessary method to raise revenue, and taxing the higher-income more than others a justified part of that. Still, the proposition begs the question: What is to keep people from voting that anyone with an income of over half a million have 50 percent of their wealth taken away? Or 75 percent? Even if this seems unlikely and outrageous, we must be careful of the direction we are headed.
Moreover, Proposition 55 sets an alarming precedent of intended temporary propositions being extended. Proposition 30 in 2012 increased taxes 1 to 3 percent for high-income taxpayers until 2018. It might not seem an extraordinary hike, but that’s $30,000 more a millionaire is paying annually.
Moreover, voters approved it in under the assumption that Gov. Jerry Brown’s emergency tax would be temporary. Consistently increasing taxes is and should be always be a temporary solution; after all, California has begun to rely too heavily on high-income taxpayers. Politicians, eager to be re-elected, do nothing to fix this system.
With this tax system of constantly targeting the wealthy, they may soon move to lower-tax areas. Furthermore, when the wealthy suffer financially, which naturally occurs every few years, and cannot offer the same expected revenue, California’s reliance on them means the entire state also takes a hit. We should look to other more stable sources of revenue other than increasing the taxes on the top 2 percent.
Government assurance of the proposition’s aid of education and Medi-Cal has also been seen as unreliable. Though the Legislative Analyst’s Office and the Governor’s Director of Finance stated that the initiative could bring in between $4 to $9 billion in annual revenue, according to CalWatchDog, it is worthy to note that little of Proposition 30’s money entered the classroom. Most of the money went instead to funding teacher retirements and likely will again, meaning voters were left misinformed while checking their ballots.
According to the conservative Hoover Institution, proponents of Proposition 55 had significantly more campaign money than dissenters and also had the support of the teachers’ union. Elite donors, such as Palo Alto physicist Charles Munger Jr. and Texas oil tycoon T. Boone Pickens, who donated millions to try to stop Proposition 30 last time, saw this proposition as a lost cause because of the power of labor unions and the public being more comfortable to extend taxes rather than impose new ones.
In 2012, there was a more pressing need for a quick infusion of cash, and Proposition 30 provided that necessary additional revenue. Four years later, the question arises as to how people and politicians can defend a tax that so targets the wealthy, especially one that stated that it would be the benefit for education.
Of course, the proposition passed, but it sets a bad precedent that shows how through taxation the majority can vote to easily control the minority.
