Two tax increase ballot measures facing voters this November deserve rejection. Proposition 3 would extend higher income tax rates initially imposed in 2012, while Proposition 40 is an attempt to levy a wealth tax on a handful of very rich individuals. Although not specifically related, the former offers a lesson why the latter should be viewed with skepticism.
The genesis of Prop. 3 occurred in 2012 amid an all-too-familiar recurring “budget crisis.” The description in the official ballot material for Prop. 30 stated that it would increase the state sales tax rate by one-quarter cent for every dollar for four years; increase personal income tax rates on upper-income taxpayers for seven years; and raise about $6 billion in additional annual state revenues from 2012-13 through 2016-17. By its very terms, Prop. 30 represented to voters that the increases would be temporary.
The plain language of Prop. 30 (2012) was affirmed by the accompanying ballot analysis. Then-Attorney General Kamala Harris (remember her?) placed “Temporary” at the beginning of the Prop. 30 ballot title in November 2012: “Temporary Taxes to Fund Education. Guaranteed Local Public Safety Funding.” Furthermore, the Argument in Favor of Prop. 30 used the phrases “Prop. 30’s taxes are temporary,” “All new revenue is temporary: Prop. 30’s taxes are temporary,” and the word “temporarily.”
Nobel Prize winning economist Milton Friedman famously said that “Nothing is so permanent as a temporary government program.” The same applies to tax hikes for many of the same reasons. Once a program or a tax is created or imposed, it builds a group of beneficiaries and employees who rely on it and lobby to keep it alive. Famous examples include the federal income tax withholding introduced during World War II as an emergency measure, but it never left. Another was the federal excise tax on long-distance telephone service in the U.S. that was introduced in 1898 to help fund the Spanish-American War and lasted for over a century.
The original Prop. 30 (2012) income tax rates were extended once already in 2016 with Proposition 55, again represented as a temporary extension. But the new Prop. 3 (2026) removes any doubt regarding progressives’ desire to make California’s highest income tax rates in America permanent.
The real lesson here is that whatever is represented to voters about a ballot measure seeking new programs or higher taxes should not be taken at face value. And here is how Prop. 3 should inform Californians about Prop. 40.
Prop. 40 claims to be a one-time tax imposed on the assets of a handful of very wealthy Californians.
But Section 50310 of the measure gives the State Legislature the power to amend the measure without voter approval: “The Legislature may amend the 2026 Billionaire Tax Act, by statute passed in each house of the Legislature by roll call vote entered in the journal, two-thirds of the membership concurring, if the statute is consistent with and furthers the purposes of the 2026 Billionaire Tax Act.”
If the purpose of Prop. 40 is to impose a tax on wealth, and it gives the legislature broad authority to determine whether the purposes would be furthered by expansion, there is virtually no restraint on what the legislature could do. (Moreover, under existing case law, courts would not disturb a legislative finding of consistency).
It is not hyperbole to suggest that this broad authority could, in a one-party progressive state like California, expose every California taxpayer, billionaire and middle-class family alike, to a tax on personal assets, including bank accounts and real estate.
When considering Prop. 40, there are many possible analogies that are fitting: “Foot in the door,” “camel’s nose under the tent,” “Pandora’s box,” to convey the view that what we vote for today can grow unrestrained in the future.
And when it comes to tax increase measures, we can be assured that truth is not a part of the proposal.
Jon Coupal is president of the Howard Jarvis Taxpayers Association