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California Tax-Hike Extension on Rich Likely

SACRAMENTO (CN) — With a voter-approved income tax hike on California's wealthiest set to expire in 2018, a coalition of the state's most powerful labor unions is dumping millions into extending the tax for another decade.

With a war chest of more than $58 million, the California Hospital Association, the California Teachers Association and other supporters hope to extend the tax on the rich and the state's reliance on its high earners.

Pitched as a "temporary" stopgap to the state's budget crisis in 2012, the plan increased the tax rate of Californians who make more than $250,000 a year to 10.3 percent, and the "millionaire" tax rate to 13.3 percent. The income tax program — Proposition 30 - was approved by 55 percent of voters in 2012.

California officials credited the tax hike with helping to stabilize California's economy, which is now operating at a surplus. Gov. Jerry Brown speculated in May that the expiring program could quickly lead to a budget deficit and resulting cuts to education and health care.

Heeding Brown's warning, the unions are asking voters to approve Proposition 55 and extend the tax hike until 2030.

They say the program is vital to education funding and California's struggling Medi-Cal system.

Proposition 55 has largely been bankrolled by education groups, which claim it does not raise taxes on anyone.

"Now is not the time to cut funding for education, which would force our schools back to the days of teacher layoffs, larger class sizes and cuts to programs. We can prevent cuts simply by maintaining the current tax rates on the wealthiest Californians with a yes vote on Prop. 55," said Chris Ungar, president of the California School Boards Association.

The educators say extending the measure is important because most California school districts plan their budgets two or three years in advance. If the tax expires, supporters estimate that public school funding could be cut by nearly $4 billion per year.

The measure stands to raise $4 billion to $9 billion per year, according to the state's legislative analyst. The tax hike has been a boon for California's tax coffers, grossing more than $31 billion since it was enacted in 2012, according to the California Department of Finance.

California State Controller Betty Yee said Proposition 55 includes safeguards that ensure the added tax revenue will be tabbed for education, and not available to the Legislature.

"There's strict accountability in Prop. 55, with local control over school funding decisions and mandatory annual audits guaranteeing the money goes directly to classrooms, not to bureaucracy, not to administration," Yee said in a Yes campaign advertisement.

Opponents say Brown and other politicians promised the tax would be temporary and that the state should be able to find ways to fund education with the current budget surplus. They say targeting the wealthy benefits special interests and punishes small-business owners.

Retired state Judge Quentin L. Kopp and the Howard Jarvis Taxpayers Association have come out against the measure and wrote the ballot argument against Proposition 55.

"We have adequate funds for schools and other critical requirements — we just need politicians with the backbone to cut waste and prioritize our spending. What we don't need is the largest tax hike in California history, sending billions more to Sacramento with no accountability to voters," the opponents state in the 225-page voter guide.

Several of California's largest newspapers have opposed the measure as well, including the San Francisco Chronicle, the Los Angeles Times and the San Diego Union-Tribune.

But the momentum appears to be with the proponents.

According to a recent Public Policy Institute of California poll, 59 percent of likely voters support Proposition 55. The online survey polled 1,498 California residents and asked questions about 10 of the 17 statewide propositions on the Tuesday ballot.

Both sides furiously raised money in 2012, raising more than $120 million in donations.

This time around, the opponents have ceased their fund raising efforts and officially raised just $6,000. The labor unions have secured more than $58 million and have been bombarding Californians with advertisements and campaign mailers.

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