Californians Approve New Taxes as Dems Win Supermajority in Legislature

Democrats won big in California Tuesday night in both state legislative chambers while also seeing tax-increasing initiatives passed on the state’s ballot.

Voters in California passed Proposition 30, a tax increase designed to prevent $6 billion in budget cuts to education. Proposition 39 also passed and will raise taxes on multi-state businesses. Finally, big wins in both state legislative chambers means Democrats will have a free hand in additional taxes and spending.

Governor Jerry Brown and teacherss unions had campaigned hard for Prop 30, claiming failing to pass it would result in drastic cuts to the state’s education budget. The proposition won late in the evening with 53.6% of the vote. Support came primarily from the Bay Area and Los Angeles, while rural and inland voters opposed it.

Prop 30 is a combination of two major tax-raising initiatives. The first part raises the sales tax in California “by one-quarter cent for every dollar of goods purchased.” The other portion was originally called the “Millionaires Tax”; it sets up a series of progressives tax increases starting with those earning $250,000 but less than $300,000. Their taxes will go up 1% to a total of 10.3% of their personal income. 

Earners who make $300,000 or more but less than $500,000 a year will have their personal income tax rate increased to 11.3%. On the high end, those earning $500,000 or more or $1 million or more jointly will see their tax rate increase to 12.3%; they will also be soaked with an additional 1% tax on earnings to pay for state mental health services that doesn’t apply to any other tax bracket, bringing their state personal income tax rate to 13.3%. 

All of the increases will be retroactively applied to tax year 2012; higher earners will owe much more to the state than they’ve already paid into throughout this year come tax time next year.

Proposition 39 changes an existing tax law which allows out-of-state businesses to calculate their taxes based on where their workers and facilities are located, not based on where they sell their products. It was promoted by San Francisco hedge fund manager Thomas Steyer and opposed by major corporations including GM, Chrysler, and Kimberly-Clarke. Prop 39 won handily with just shy of 60% of the vote.

In addition to raising taxes on businesses operating out of state, Prop 39 directs half of the anticipated billion dollars in yearly additional revenue into a new “green” energy fund. That fund is established for the first five years of the tax increase, netting an estimated $2.5 billion for unspecified projects.

These are not likely to be the last tax increases Californians see. Democrats had a banner night Tuesday and are on the verge of clinching supermajorities in both the state House and Senate. One-party rule means the left’s agenda will now be unfettered in the state.