California voters will decide on November 3 whether the state's highest income tax rates become permanent. Proposition 3 deletes the expiration date on the extra 1, 2 and 3 percentage points that voters first approved in 2012, and county election offices begin mailing ballots to every active registered voter on October 5. For households in the top 2% of earners, the measure settles a question that otherwise would have come up in the 2031 tax year: whether their marginal state rate falls back to 9.3%.
What changed
Proposition 30 in 2012 added three brackets above the regular 9.3% rate, and Proposition 55 in 2016 extended them through the 2030 tax year. Prop 3 does not raise any rate or lower any threshold. According to the Legislative Analyst's analysis in the official voter guide, it simply removes the end date, so the rates continue until voters repeal them.
The analyst estimates the measure keeps $5 billion to $15 billion a year flowing to the state, near the low end in a weak stock market and the high end in a strong one, because much of the revenue comes from capital gains and other investment income. Under the measure, 89% of the money goes to K-12 schools and 11% to community colleges.
Who is affected
At 2025 levels, which are adjusted for inflation each year, the extra rates apply to taxable income above about $371,000 for single filers, $505,000 for heads of household and $743,000 for married couples filing jointly. The schedule for single filers:
| Taxable income, single filer | Rate through 2030 | After 2030 if Prop 3 passes | After 2030 if it fails |
|---|---|---|---|
| $371,000 to $446,000 | 10.3% | 10.3% | 9.3% |
| $446,000 to $743,000 | 11.3% | 11.3% | 9.3% |
| Above $743,000 | 12.3% | 12.3% | 9.3% |
For joint filers the same three rates start at about $743,000, $892,000 and $1.5 million. Separately, California's 1% Mental Health Services Tax on taxable income above $1 million, which is not indexed for inflation, is not part of Prop 3 and stays in place either way. That surcharge is why the top combined rate is 13.3%.
The after-tax math
The measure's practical effect is the difference between the current rates and 9.3% on income above the thresholds, starting with the 2031 tax year. Illustrative figures at 2025 bracket levels, before any inflation adjustment:
- Single filer with $500,000 of taxable income: about $1,800 a year more than if the rates expired.
- Single filer with $1 million: about $14,400 a year.
- Married couple with $1 million: about $3,700 a year.
- Married couple with $2 million: about $28,700 a year.
The figures apply to wages, bonuses, vested restricted stock, business income and capital gains alike, since California taxes gains as ordinary income. That makes the measure most consequential in single years with a large liquidity event, such as an equity sale or a business exit, when income spikes into the top bracket. California does not tax Social Security benefits, but withdrawals from traditional 401(k) and IRA accounts and pension income are taxed at the same rates.
Moves to discuss with your advisor
Because the rates run through 2030 either way, the vote matters mainly for income that will be recognized in 2031 and later: deferred compensation scheduled to pay out in retirement, required distributions from large pre-tax retirement balances, and planned sales of concentrated stock. Households weighing Roth conversions, the timing of installment sales or a move out of state after retirement often compare the after-tax result under both outcomes. A CPA or financial planner can model the difference with actual figures.
What to watch
Supporters, led by the California Teachers Association and other education and health care groups, argue the measure protects school budgets from a large revenue drop. Opponents, including the California Taxpayers Association and the Howard Jarvis Taxpayers Association, say the rates were promised as temporary and point to the risk of high earners leaving the state. Drop-off locations open October 6, the last day to register online is October 19, and mailed ballots must be postmarked by November 3.
Sources
- First reported 2026 General Election explainer: Proposition 3 — KPBS
- Official Voter Information Guide: Proposition 3, title, summary and Legislative Analyst's analysis — California Secretary of State
- What to know about Prop. 3, a tax on CA high-income earners — CalMatters
- Bill analysis describing the 1% Mental Health Services Tax on taxable income over $1 million — California Franchise Tax Board
- General Election, November 3, 2026 — California Secretary of State
After TAX is an independent publication. Articles are general information, not tax, legal or investment advice. Consult a licensed professional about your situation.
