Let me walk you through something that's coming up on the California ballot that's going to affect a lot of high-income folks in our region. According to CalMatters Housing, there's a tax on top earners that was originally passed back in 2012 as a temporary measure to handle a budget crisis. The thing is, it's set to expire in five years unless voters approve something called Proposition 3 to make it permanent.
The argument against making it permanent comes from tax policy advocates who say California has a bad habit of creating "temporary" taxes that just never seem to go away. Once the state adjusts its spending to that higher revenue, it becomes the new normal, and politicians treat it like it's always been that way. According to the reporting, they're pointing out that California's already spending record amounts on education and the state budget overall has grown substantially in just the past five years.
Now, the concern from this perspective isn't just about wealthy earners. Since California doesn't cleanly separate business income from personal income, a lot of small business owners who structure as sole proprietorships, partnerships, or S corporations actually report their business earnings on personal income tax returns. So keeping those higher tax rates means higher costs for some business owners, which can eventually mean higher prices for customers. Add to that California's already got the nation's highest personal income tax rates, plus the highest state sales tax and gas tax.
There's also the issue of revenue stability. When you lock in permanent spending based on taxes from high earners, you're building the budget around the state's most unpredictable revenue source. During good times, that money flows in. But when the economy contracts, high-earner income can drop significantly, leaving the state scrambling to cover obligations during the times when people actually need services most.
What I'm seeing locally here in the Bay Area is that our region's already dealing with affordability pressures that keep people up at night. This conversation about tax structure matters because it affects business costs, property valuations, and ultimately who can afford to stay here. Whether this measure passes or not, we're going to be navigating these economic pressures for years to come, and it's worth understanding what's really behind the numbers you're hearing about.
