Proposition 30 Imposes Additional Taxes Retroactively & Increases Sales Tax

by BPW | December 18, 2012

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On the November 2012 Ballot, 55.3% of Californians voted YES on California Proposition 30. It is estimated that Prop. 30 will raise on average an additional $6 billion in annual state revenues to provide additional funding for California’s education system.

Prop. 30 will increase personal income tax retroactively starting January 1, 2012. Individuals in the State of California who earn over $250,000 ($500,000 for couples) will be taxed an additional 1%; those making over $300,000 ($600,000 for couples) will be taxed an additional 2%; and those making over $500,000 ($1,000,000 for couples) will be taxed an additional 3%.

Prop. 30’s personal income tax increase is set to be effective over the next seven years.

As a result of Prop. 30 being retroactive, those who make over $250,000 annually will have higher-than-anticipated personal taxes for 2012 and will owe more on their estimated taxes for the year. However, due to California law having a safe-harbor provision, taxpayers will not be required to make catch-up payments. Additionally, taxpayers will not be penalized with an underpayment penalty for underpaying their estimated California income taxes, if the underpayment was due to an increase in their taxes by Prop 30. The additional taxes can be included in their final payment on April 15th.

In addition to the personal income tax increase, another tax increase will affect all residents of California. Starting on January 1, 2013, the sales and use tax will increase by a quarter of a percent. The higher sales and use tax will be in effect through December 31, 2016.

In some cities, there were also voter-approved district taxes that will be in addition to the statewide 7.50% sales and use tax. These additional district taxes will start on April 1, 2013, which will mean a range of 7.50% to 10% sales and use tax across the State of California.

If you have any additional questions on Proposition 30 or how we can help you incorporate effective tax strategies to lessen your burden, please contact your advisor at (805) 963-7811.