This is Part 2 of a two-part series. Go here for Part 1.The answer is not a piece of cake, but if you are willing to dig in and digest it, you’ll be full of knowledge about taxes that many people don’t have.
The 30-second Answer
Prop 30/Brown proposes a 0.25% increase in the sales tax which will be paid by everyone, plus a 1-3% increase in the Personal Income Tax for the highest income earners who comprise about 1% of personal income taxpayers. The majority of the revenue raised is expected to come from the Personal Income Tax.
Prop 38/Munger proposes a 0.4-2.2% increase in the Personal Income Tax for all but the lowest personal income taxpayers. While 60% of personal income taxpayers will be affected, the highest increases will be borne by the top 1% of personal income taxpayers.
Voters can approve both propositions, but legal, education and policy experts are predicting that only the proposition with the most votes will be enacted. Much of that decision will be in the hands of the courts, if it occurs. More information on what happens if both propositions are approved can be found here.
That’s the quick and factual answer to that question, but do you know what it really means? To really understand it, you need to spend a little more time with the details…
The 10-minute Answer
Do you really know how progressive income taxes work?
Most people don’t. And because we don’t, we can get really worked up and worried reading news about tax increases. Here’s a little video I did about how progressive income taxes work so that you will understand the implications of those facts.
Bow that you’ve watched the video, let’s see if you can read these charts more easily. These are the proposed changes to California’s Personal Income Tax by Prop 30/Brown, followed by Prop 38/Munger, and provided by the California Legislative Analyst’s Office analyses of Prop 30 and Prop 38, bwlos.
Posted: Tuesday, 16 October 2012