Proposition 3: A Familiar Income Tax Measure Returns to California Ballots
SACRAMENTO, CA., 10/23/26 — You might recognize Proposition 3; it’s the third time this income tax initiative has found its way onto California’s ballots. However, this might be its final chance for approval.
Prop. 3 seeks to permanently extend an income tax on wealthy individuals to support funding for schools, healthcare, and other state services. Initially introduced as a temporary tax during the Great Recession in 2012, it was renewed by voters in 2016. Supporters are now urging Californians to make it a permanent fixture before it expires in 2031.
David Goldberg, the president of the California Teachers Association—California’s largest teachers union and a leading proponent of the measure—emphasized its significance. “I can’t overstate how important this is. It’s only a tax on the wealthiest Californians, but it’s vital for our schools,” he stated.
If passed, the measure would apply to individuals earning over $371,000 or couples making over $743,000 annually. The tax typically brings in between $5 billion and $15 billion each year, fluctuating with market conditions and interest rates that impact the income of top earners.
Those at the top would continue to face a 12.3% income tax rate. When factoring in an additional 1% tax for mental health services on income exceeding $1 million, California’s wealthiest would face a remarkable income tax rate of 13.3%—the highest in the nation.
The majority of the revenue generated would go through California’s Proposition 98 funding system, which mandates that 40% of the state budget is allocated for K-12 schools and community colleges. Any excess funds beyond a certain threshold would contribute to a budget reserve.
Moreover, Prop. 3 would help finance healthcare and other services, reallocating funds typically dedicated to education. According to the Legislative Analyst’s Office, 89% of the Prop. 98 budget is earmarked for K-12 schools, while 11% supports community colleges.
In prosperous years, the income tax contributes roughly 15% of the state’s total K-12 education budget. However, if the measure fails, there could be significant consequences, including up to 50,000 teacher layoffs, Goldberg warned.
Union’s Major Efforts
The teachers union is vigorously backing Prop. 3, collecting numerous signatures to secure its place on the ballot and mobilizing members to reach over 200,000 doors across the state. Goldberg called it “one of our biggest, most ambitious efforts yet.”
With over $40 million raised to support Prop. 3, the powerful union, along with other supporters, dwarfs the $5,500 raised by opponents, who include taxpayer advocacy groups.
Support for the measure seems to be gaining traction among voters. A September poll from the Public Policy Institute of California found that 58% of likely voters intended to vote in favor. Notably, 82% of Democrats were in support, while 18% of Republicans expressed approval.
It’s worth mentioning that Prop. 3 isn’t the sole tax measure targeting the wealthy this November; Proposition 40 proposes a 5% tax on individuals with assets surpassing $1 billion, with most funds directed to healthcare. The teachers union opposes Prop. 40, arguing that it won’t sufficiently benefit schools, as Goldberg elaborated.
“We’re not campaigning against Prop. 40. We’re just prioritizing Prop. 3,” he clarified.
The union’s decision to push for the measure now, more than four years prior to the current tax’s expiration, relates to the essential long-term budget planning schools engage in. Advance notice is crucial for any significant revenue changes, Goldberg noted.
Concerns Over Sustainability
On the flip side, critics like Susan Shelley, vice president of the Howard Jarvis Taxpayer Association, raise questions regarding the necessity for additional funding in schools. Given recent state investments and falling enrollment numbers, she argues it might be time to reconsider expense structures.
“We have fewer and fewer students. Does this mean we need fewer teachers? Maybe it does,” Shelley remarked. “Some districts have unaffordable labor contracts, and it’s just not sustainable.”
Furthermore, Shelley indicated that California’s existing income tax rate of 13.3% is already the highest in the country. Additional tax increases could drive wealthier residents—and their financial resources—out of California, negatively impacting state revenues. According to the Legislative Analyst’s Office, California’s top 2% of earners contribute approximately half of the state’s income taxes.
California has seen a steady decrease in K-12 enrollment over the past decade, losing over 500,000 students since the mid-2010s due to a mix of lower birth rates, reduced immigration, and high living costs driving families away.
Still, the state grapples with high student-to-teacher ratios. In the 2022-23 school year, California had one teacher for every 22 students, compared to the national average of 1:15, and just over 1:11 in New York.
Advocates like Rob Manwaring, a senior policy and fiscal adviser at Children Now, argue that increased funding is essential. “Those ratios mean that students who need extra help aren’t getting it, which is why we have such a large achievement gap in California,” he stated. “It’s dire.”
Manwaring also pointed out that ongoing federal budget cuts will have repercussions for California schools, necessitating additional revenue to cover those losses. The looming possibility of an economic downturn could further jeopardize school funding going forward.
“No one wants to project too far ahead, but schools might face some very tight budgets,” he added.
