Should the rich pay more to support schools? That’s a question that voters in California and Maine will answer on Election Day.
The two states have ballot initiatives proposing higher taxes on their top earners.
Maine voters will decide whether to add a 3% surtax on taxable income over $200,000. Today, anyone with taxable income of $75,000 or more pays a top rate of 7.15%. If Question 2 passes, those who make above $200,000 would pay 10.15%.
The additional revenue — estimated at more than $157 million a year — would help pay for K-12 public education.
Proponents argue it will help create an educated, skilled workforce that will attract employers to the state. And, they say, it will help make up for recent tax cuts that have benefited the wealthy while compromising state funding for education.
Opponents contend it will hurt small businesses and make the state less competitive.
If Question 2 passes, Maine will have the second highest income tax rate in the country, according to the Tax Foundation. And it will create a so-called “marriage penalty” because the 3% surtax would apply to any household income over $200,000, whether it was made by a single person or a married couple filing jointly.
Californians, meanwhile, must decide whether to extend for a dozen years its “temporary” tax increases on top earners. To help get out of a budget crunch in 2012, the state added between 1 and 3 percentage points to its top rate of 10.3% for incomes over $250,000.
The end result: Those making more than $1 million have been paying a 13.3% income tax rate, the highest in the country by far.
Those rate increases are set to expire at the end of 2018. The ballot initiative known as Proposition 55 would extend them through 2030. Since the current rates would be extended, proponents argue it’s not an increase.
They say it will prevent billions of dollars in cuts to children’s education and health care for the poor.
Opponents say it “will cause a massive ‘exodus’ of jobs and capital out of California.
The measure is estimated to raise between $4 billion and $9 billion a year, depending on economic and stock market performance. The money is intended to support K-12 education, community colleges and the state’s Medicaid program.
If Proposition 55 passes, a married couple making more than $2 million would pay $37,890 more in taxes than they would if the tax increase is allowed to expire, according to a legislative analysis of the measure.
If the measure doesn’t pass, the rich may pay less come 2019, but barring changes in other states between now and then, California will still be known as the state with the highest income tax rate in the country.