California Prop 55: Tax Rates, 2030 Sunset, and 2026 Ballot Measure

California Proposition 55 is a 2016 ballot measure that extended the state’s temporary income tax surcharges on high earners through the 2030 tax year, raising an estimated $4 billion to $9 billion annually for K-12 schools, community colleges, and, in some years, Medi-Cal.¹ It did not create a new tax. It kept the higher rates first set under Proposition 30 in 2012, and it applies only to roughly the top 1.5 percent of California earners, adding 1 to 3 percent on top of the standard 9.3 percent top bracket depending on income.²

Who Pays and How Much in 2026

The surcharge sits on top of California’s 9.3 percent bracket in three tiers. The dollar thresholds adjust for inflation each year. For the 2026 tax year:³

1 percent surcharge, for a 10.3 percent total rate: single filers with taxable income above $371,479; joint filers above $742,958.
2 percent surcharge, for an 11.3 percent total rate: single filers above $445,771; joint filers above $891,542.
3 percent surcharge, for a 12.3 percent total rate: single filers above $742,953; joint filers above $1,000,000.

The original 2012 entry point was $250,000 for single filers and $500,000 for joint filers. Inflation adjustments have pushed every threshold meaningfully higher since then.²

Why You See 13.3 Percent Quoted Instead

California’s top marginal rate is commonly cited as 13.3 percent, which can make the Proposition 55 numbers look wrong. The extra percentage point comes from the Behavioral Health Services Tax on taxable income over $1 million, a separate law unrelated to Proposition 55.³ A millionaire therefore faces a combined 13.3 percent top state rate on ordinary income. Factor in the state’s disability insurance payroll tax and the all-in rate on wages can reach 14.6 percent.

Where the Revenue Goes

Most of the money flows into the Education Protection Account, a constitutionally protected fund created under Proposition 30. The EPA is meant to supplement, not replace, what schools would otherwise receive from the state budget.¹ Allocations run roughly 89 percent to K-12 public schools and 11 percent to California Community Colleges, distributed by enrollment.⁴ Districts that receive EPA funds must have an independent annual audit submitted to the California Department of Education, the State Controller’s Office, and the County Superintendent of Schools.⁵

Proposition 55 also set up a conditional funding stream for Medi-Cal. If General Fund revenue in a given year exceeds both the Proposition 98 education guarantee and the cost of state programs that existed as of January 2016, half of that surplus goes to Medi-Cal, capped at $2 billion a year.¹ The trigger is hard to hit. California has run large deficits in recent years and has acknowledged overestimating revenues by tens of billions following the pandemic, so the Medi-Cal formula often produces little or nothing in practice even as the program covers more than 14.5 million residents at a cost above $200 billion a year.

One boundary worth noting: Proposition 55 did not extend the quarter-cent sales tax increase that was also part of Proposition 30. That sales tax expired at the end of 2016 regardless of how the vote went.²

Filing and Estimated Payments

If your income lands in Proposition 55 territory, the surcharge is already built into California’s tax rate schedule. You calculate it on your standard return using Form 540 or Form 540NR, and there is no separate form for the surcharge itself.⁶

The piece that catches people out is quarterly estimated tax. High-income filers generally owe enough that they have to prepay through Form 540-ES. The Franchise Tax Board charges a 4 percent penalty on underpaid estimates, and interest on unpaid balances runs at 7 percent for the period through mid-2026.⁷ Taxpayers required to pay estimates electronically who send a check instead face an additional 1 percent noncompliance penalty.⁶

The Federal SALT Cap Makes the Surcharge Hurt More

The federal state and local tax deduction cap changes the real cost of Proposition 55 for most people who pay it. Under current federal law, the SALT deduction is capped at $40,000 for most filers starting in 2025 and rises by 1 percent each year, reaching about $40,400 for 2026. For taxpayers with modified adjusted gross income above $500,000, the cap phases down and bottoms out at $10,000 once income exceeds roughly $600,000.

Nearly everyone paying the Proposition 55 surcharge earns above that phase-out range. Their California tax alone already exceeds the federal cap, so the surcharge dollars are effectively non-deductible at the federal level. A single filer earning $750,000 in California owes about $74,000 in state income tax but can deduct only $10,000 on the federal return.

The 2030 Sunset

Proposition 55 has a hard sunset date of December 31, 2030. The higher rates apply through the 2030 tax year and then expire automatically.⁴ At that point the top income tax rate drops from 12.3 percent back to 9.3 percent across all three surcharge brackets, bringing California’s overall top marginal rate from 13.3 percent down to 10.3 percent. The 1 percent Behavioral Health Services Tax on income over $1 million would stay in place because it comes from a separate law.

The revenue loss would be substantial. The Legislative Analyst’s Office projected $4 billion to $9 billion a year when the measure passed, with the wide range reflecting the surcharge’s heavy dependence on capital gains and stock market swings.¹ Letting it lapse in 2031 without a replacement would open a significant hole in education funding and end the conditional Medi-Cal allocation.

The 2026 Ballot Initiative to Make It Permanent

Supporters are already moving to prevent the sunset. An initiative formally called the Renew State Income Tax Increase for Education Funding Initiative (Initiative #25-0016) was cleared for signature gathering in November 2025. Rather than extending the rates for another set period, it would remove the expiration date entirely and make the surcharges permanent.⁸

The rate structure and the 89/11 split between K-12 schools and community colleges would stay the same, and the income thresholds would keep adjusting for inflation each year. As of early 2026, the campaign reported collecting about 25 percent of the roughly 547,000 valid signatures needed to qualify for the November 2026 ballot.⁸ Whether that measure qualifies and passes will decide whether high-income Californians face these surcharges indefinitely or see them disappear after 2030.

1
Legislative Analyst’s Office. Proposition 55 Tax Extension to Fund Education and Healthcare
2
California Secretary of State. Proposition 55 Title and Summary and Analysis
3
Tax Foundation. State Individual Income Tax Rates and Brackets, 2026
4
California Secretary of State. Proposition 55 – Official Voter Information Guide
5
California Department of Education. CAARO Update Issue 2026-01
6
Franchise Tax Board. 2026 Instructions for Form 540-ES Estimated Tax for Individuals
7
FTB.ca.gov. Interest and Estimate Penalty Rates
8
Ballotpedia. California Renew State Income Tax Increase for Education Funding Initiative (2026)