California Proposition 217, Income Tax Increase (1996)
If Proposition 217 had been approved, it would have reinstated the income tax increase for higher-income taxpayers that ended in 1995 and allocated the money from this tax increase to schools and local governments.
Under Proposition 217, the personal income tax rate for individual taxpayers earning from $115,000 to $230,000 would have increased to 10% from 9.3%. For those earning over $230,000, the rate would have gone to 11%. For married couples, the rate would have gone to 10% for couples earning between $230,000 and $460,000, while for couples earning over $460,000, the rate would have increased to 11% from 9.3%.
These tax increases would have affected approximately 1% of the state's taxpayers; a group that was cumulatively paying about $6.5 billion a year in state incomes taxes to California in 1996, or 31% of the state's total annual state income tax collections.
Approximately half of the additional revenues raised by the proposed tax increase would have gone to local governments and the other half would have been earmarked for local school districts.
Text of measure
The official ballot summary that appeared on the ballot said:
- Retroactively reinstates 10% and 11% tax rates, respectively, on taxpayers with taxable income over $115,000 and $230,000 (current estimates), and joint taxpayers with taxable income over $230,000 and $460,000 (current estimates).
- Requires Controller to apportion revenue from reinstated tax rates among counties.
- Requires counties to allocate that revenue to local government agencies based on each local agency's proportionate share of property taxes which must be transferred to schools and community colleges under 1994 legislation.
- Prohibits future reduction of local agency's proportionate share of property taxes.
The California Legislative Analyst's Office provided an estimate of net state and local government fiscal impact for Proposition 217. That estimate was:
- "Annual increase in state personal income tax revenues of about $700 million, with about half the revenues allocated to schools and half to other local governments."
- Official Voter Guide to Proposition 217
- Full text of Proposition 217
- November 5, 1996 California election results (dead link) (PDF)
- PDF of the paper version of the November 5, 1996 Ballot Propositions Voter Guide
- League of Women Voters analysis