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Nov. 9 — California voters overwhelmingly approved continued tax increases on high-income earners, as well as new taxes on legalized recreational marijuana and tobacco products.
Voters approved Proposition 55 to extend temporary income tax increases on high-income earners for 12 more years beyond a 2018 expiration date with 62.1 percent in favor and 37.9 percent opposed. The measure passed in all but five of California’s 58 counties.
A coalition lead by the California Teachers Association and California Hospital Association, with some help from entrepreneur and activist Tom Steyer, mounted a one-sided campaign to make the increases last longer.
“By passing Proposition 55, with resounding support, the voters of our state have made it clear that they don’t want our public K-12 schools and community colleges to return to the days of teacher layoffs, larger classes and skyrocketing tuition, or see cuts to other vital services,” Proposition 55 spokeswoman Jennifer Wonnacott said in a Nov. 9 news release.
About half of the revenue of $4 billion to $9 billion a year will continue to go to K-12 education, and up to $2 billion will go to Medicaid each year. Also, between $60 million and $1.5 billion will go into the state’s budget reserve fund each year.
Gov. Jerry Brown (D) championed the temporary income tax increases when voters first approved them in 2012 to close a chronic budget gap, but he took no position on Proposition 55.
With adjustments for inflation built into Proposition 55, earners in the following brackets will pay 1 percent to 30 percent more than the base rate of 9.3 percent they paid before 2012:
Voters also legalized recreational use of marijuana, with 56 percent in favor of Proposition 64 and 44 percent against. Support came from 37 of the state’s 58 counties, including the key marijuana-growing counties of Mendocino and Humboldt.
The measure includes a 15 percent excise tax on retail sales of marijuana, and cultivation taxes of $9.25 per ounce of cannabis flowers and $2.75 per ounce of leaves to take effect Jan. 1, 2018.
Recreational use of marijuana is legal for adults 21 and older as of Nov. 9, although full licensing, regulation and taxation won’t be in place until Jan. 1, 2018. State agencies such as the State Board of Equalization may be issuing provisional licenses in the short term, according to the Proposition 64 campaign.
At the same time, medical marijuana products, which have been legal in California since 1996, are now exempt from sales and use tax as of Nov. 9.
The statewide measure could generate as much as $1 billion a year, depending on the amount of compliance among growers and retailers, the impact of legalization on prices and regulatory costs.
Lt. Gov. Gavin Newsom (D), a key backer of Proposition 64, told reporters Nov. 9 that California’s passage of the measure is a tipping point for legalization and legal banking access for marijuana businesses across the country.
“This is, I think, the beginning of the end of the war on marijuana,” he said.
Meanwhile, several cities and counties with new authority this year to impose their own taxes on marijuana won voter approval to tax the products.
Voters in the San Francisco Bay Area cities of San Leandro and Pittsburg approved a 10 percent sales tax, while Hayward voters approved a 15 percent sales tax. Voters in the rural county of Calaveras, southeast of Sacramento, approved taxes on cultivators based on the amount of plants they grow, the weight of the products and their gross proceeds.
Voters also approved Proposition 56 to increase the state tax on cigarettes by $2 a pack on April 1, 2017, with 62.9 percent in favor and 37.1 percent opposed. The new tax will be added to current state excise taxes of 87 cents per pack, and applies to e-cigarettes and other tobacco products as well.
Revenue from the new tax will be deposited in a separate state fund that will be used for state health care programs.
With assistance from Joyce Cutler in San Francisco.
To contact the reporter on this story: Laura Mahoney in Sacramento, Calif., at LMahoney@bna.com
To contact the editor responsible for this story: Ryan C. Tuck at firstname.lastname@example.org
More information on Proposition 55 is at http://vote.sos.ca.gov/returns/ballot-measures/.
Copyright © 2016 The Bureau of National Affairs, Inc. All Rights Reserved.
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