For nearly 15 years, California has taxed its highest earners at higher rates than everyone else. Those rates have generated roughly $120 billion for schools and other services since 2012. And even with this modest tax, the incomes of California’s wealthiest households have grown dramatically over the same period. Now voters face a question about what happens next: Should those rates continue, or should they expire after 2030?

Proposition 3, on the November ballot, would remove the expiration date from the higher tax rates voters approved in 2012 and renewed in 2016. It would not create a new tax or change existing rates. Instead, it asks voters to make current rates permanent.

The rates apply to only about the top 2% of California tax filers, and the brackets adjust each year with inflation. In 2025, they started at roughly $371,000 in taxable income for a single filer and $743,000 for a married couple filing jointly. The highest of the three rates sits higher still, taking effect when a single filer’s taxable income reaches about $743,000, or a couple’s tops nearly $1.5 million.

And the Californians subject to these rates have been doing exceptionally well.

Between 1987 and 2024, inflation-adjusted incomes for California’s top 1% grew by 157%, while the bottom 80% lost ground. In 2024, the average income for the top 1% topped $3 million, compared with about $56,000 for the middle fifth of Californians. Someone in the top 1% earns in a week what a middle-income Californian earns in a year. For the top 0.1%, it takes a little over a day.

Scare tactics

Opponents warn that taxing high earners will drive them out of California. The data say they’re wrong.

The number of California resident filers with incomes high enough to pay these rates has more than doubled since the rates took effect — from about 175,000 in 2013 to nearly 355,000 in 2024. There are twice as many Californians earning enough to pay the top tax rates today as when they were introduced.

That revenue has become fundamental to California’s budget, raising roughly $10 billion a year in recent years. For example, that’s about the amount of state dollars that goes to the California State University and University of California systems each year.

Those dollars are more than figures debated in Sacramento. They flow directly to local schools and community colleges, and they count toward California’s school funding guarantee — freeing up billions in the General Fund for health care and the safety net.

They supported the expansion of universal transitional kindergarten (TK), a new opportunity open to every four-year-old regardless of income or background. The revenue Prop. 3 proposes to make permanent would support children’s health coverage, help Californians receive affordable health care through Medi-Cal, provide childcare that lets parents work and fund programs that help a neighbor stay housed.

The stakes are especially high right now. California is already facing serious budget pressure from federal cuts to health care and food assistance that millions of vulnerable Californians count on. If the top rates expire, the state could lose another $5 billion to $15 billion a year, meaning roughly $2 billion to $6 billion less for TK-14 education. That would put California’s eight million public school children and community college students at risk of teacher layoffs and crowded classrooms and would jeopardize preventive care, affordable prescriptions and Medi-Cal coverage.

Stakes high

Revenue from high earners does come with volatility; it rises and falls with the stock market and broader economy. Our state leaders planned for that by growing the state’s Rainy Day Fund and by asking voters to strengthen it further this November through Prop. 2, better protecting California families from the thousands of pink slips and other service cuts that came during the Great Recession.

Allowing the rates to expire would mean a substantial tax cut for the state’s wealthiest residents and less revenue for schools, health care, and other essential programs. The top 1% would collect about 98% of those tax cuts, an average of nearly $59,000 a year per household.

Many of these same households already benefited from the federal tax law, H.R. 1, enacted last year, which cut taxes for the wealthy while making historic cuts to health and social services. According to the Center on Budget and Policy Priorities, the average filer earning $1 million or more a year will receive over $100,000 in federal tax breaks. An average family earning less than $50,000 will only get about $250 in 2027, less than $1 a day.

Prop. 3 asks voters a straightforward question:

Should California keep the current rates that have funded its schools, health care and safety net for over a decade or hand the wealthiest Californians another tax cut they don’t actually need?

Chris Hoene is the executive director of the California Budget & Policy Center, a nonpartisan research and analysis nonprofit advancing public policies that expand opportunities and promote well-being for all Californians. The Budget Center does not endorse or oppose ballot measures.