This November, California voters have two different options for raising taxes on themselves: Proposition 30, "The Schools and Local Public Safety Protection Act," and Proposition 38, "Our Children, Our Future: Local Schools and Early Education Investment and Bond Debt Reduction Act."
Both would raise taxes on nearly all Californians. 38 would raise income tax rates on all earnings above $7,316, at progressively higher rates. 30 would tax everyone through raising the state sales tax from 7.25 to 7.5%. 30's income tax hikes only hit the 1%: single fliers in the $250,000+ bracket and couples at $500,000+. 38 would raise far more revenue ($10 billion+ vs. $6-9 billion at 30's peak), and for longer (12 years vs. 4 for 30's sales tax increase, 7 for the income tax).
38's chief supporters are the California PTA and attorney and Berkshire Hathaway heiress Molly Munger. Gov Brown, most of the state's Democratic establishment, and labor unions are behind 30. As of September 1, 2012, 38 had raised $18.8 million, nearly all from Munger. 30 had raised $26.2 million, mostly from labor unions.
Both display the brokenness of California's political process. Voters will decide what they will. Maybe they'll reject both. But, at the very least, unions and the wealthy elite have once again demonstrated their ability to manipulate democracy in California by forcing issues and defining the terms of the debate. It just takes money.
Prop 38 is the bigger tax hike, but it's less despised (38's opposition has raised $30.8 thousand vs. 30's $1.9 million) because it's less likely to pass, and less manipulative. Opponents of 30 have described 30 as "blackmail" and an attempt to "hold students hostage." These refer to how the Governor and Legislature structured the FY13 budget plan around the assumption that 30 would pass. They are thus positioned to argue that a vote against Prop 30 is less a vote to raise taxes than it is to cut school spending. "There are a lot of other measures on the ballot...Only this measure saves cuts this year...There's no doubt about it."
38's backers have touted how much stricter 38's spending restrictions are than 30's. 38's text takes up twelve pages as opposed to 30's four. By means of its many and detailed restrictions, 38 hopes to bypass all state and local bureaucracy and force all new revenues to be spent at the school level and on the same per-pupil basis as they are allocated. 38 even "ensures schools may not use these new funds to increase salaries and benefits," unless other funds are being used for same purpose (discussed here). Examples of expenditures officially sanctioned by 38 include enhanced curriculum, smaller class sizes, more on-site support staff, and extended learning time.
30's revenues would be considered general fund revenues for the purpose of calculating the 98 minimum guarantee. 38 aims to provide support for K-12 public education beyond Prop 98. In its first four years (FY14-17), 38 would devote 60% of new revenues to K-12, rising to 85% in subsequent years. At least 30% ($3 billion) of revenues from the first four years would go towards servicing and retiring education-related bond debt. The remaining 10-15% would go to early childhood education programs. Unlike 30, 38 provides no money for community colleges, only K-12.
30 contains no maintenance-of-effort provisions. 38 does, directed at federal, state and local funding sources.
Both have progressive tax structures that would exacerbate California's problems with revenue volatility, although 30 more so. To their credit, the framers of 38 have attempted to address this problem by diverting revenues in excess of baseline economic growth towards debt service. But whatever: 38 doubles-down on income taxes and tax structure progressivity, and thus will increase volatility, too. California's top 1% would provide 44.1% of all new revenues from 38 and the top 20% 85.6% (source).
Despite earnest efforts to achieve maximum educational benefit with the new revenues, 38 is open to the same "shell game" critique that has been directed at 30. For example, even though 38's funds are not going into the general fund, its debt relief portion will indirectly provide the general fund with an extra $3 billion annually.