California's Prop. 3 would keep top income tax rates past 2031 for nearly 376,000 taxpayers
California's Proposition 3 would make the 10.3% to 12.3% top income tax rates permanent, affecting nearly 376,000 taxpayers, American Banker reported. The rates now lapse in 2031, so a passing vote changes what clients owe in every later year.
The Investor · Invest desk
Prop. 3 would affect nearly 376,000 individuals, based on 2024 data. The billionaire tax, Prop. 40, would affect about 200 Californians, according to its proponents. The top rates apply to income above $361,000 for single filers and $721,000 or more for joint filers.
| Figure | Value | Note | Claim |
|---|---|---|---|
| Individuals Prop. 3 would affect, nearly (2024 data) | 376,000 people | 4 | |
| Californians Prop. 40 would affect, about | 200 people | per the measure's proponents | 5 |
| Single filers' income above which top rates apply | 361,000 dollars | $721,000 or more for joint filers | 3 |
What happened
- The rates apply to income above $361,000 for single filers and above $721,000 for joint filers.
- Most of the revenue would go to K-12 schools, with the rest going to community colleges.
- A September Public Policy Institute of California survey found 58% of likely voters would support Prop. 3 and 40% would oppose it.
- Marc Rosenbach of Atlas Legacy Advisors said voters first approved the temporary increase in 2012 and that some top-bracket earners now "feel misled."
Why it matters
- Who has to decide decision A client weighing a domicile change needs a family-office approach with legal and tax counsel, Diarbakerly said, so that decision runs on a slower clock than the vote.
- Who's exposed exposure Clients in these brackets are probably also paying the top federal marginal rate and the net investment income tax, according to Diarbakerly, so a permanent California rate stacks on both.
- What doesn't add up contradiction Polling points to passage, yet advisors Jason Stephens and Marc Rosenbach each say the billionaire tax is taking the attention.
The ratio is about 1,880 to one [18], nearly 376,000 filers against roughly 200, and the two counts are not built the same way. The 376,000 rests on 2024 data [4]. The 200 is the billionaire tax proponents' own figure [5], and Proposition 40 is a one-time tax [9] where Proposition 3 sets a rate that applies every year it stays on the books [1].
The vote changes the years after 2031. The higher rates are in force now and set to lapse then [1], so the added cost to a client starts at the sunset and has no end date. In our view that makes the first planning question one of timing: income and Roth conversions pushed past 2031 would meet a lower rate under a sunset and the same rate under permanence. American Banker lists residency, Roth conversions and the timing of capital gains and other income as the open questions [8].
Relocation is the slower decision. Residents may not leave right away, American Banker reported, but permanent rates could weigh on moves over the coming years [20]. "If you're a good advisor, you should tell your client they should live the life they want to and not live it around taxes," said Samuel Diarbakerly, founder and CEO of Generation Capital Advisors [10]. He also described a narrower group: "Now some clients have the prerogative and are principal-bound and say, 'Hey, if I get taxed one more dollar, I am out of here,'" Diarbakerly said [11].
We think timing is the stronger reason to plan now, since it needs only a passing vote, and the polling favors one: the September survey's lead is 18 points among likely voters [19], and American Banker says polling indicates the measure is likely to pass [16]. It could go differently in two ways. The measure could fail, which returns the planning question to the 2031 sunset. Or it could pass and change little in client behavior, if high earners treat the rate as the cost of living in California. American Banker did not report how many of the 376,000 have changed any plan so far.
What to watch
- Whether later surveys keep Prop. 3 ahead by the 18 points the September Public Policy Institute of California poll showed.
- Whether advisor and client attention moves from the billionaire tax to Prop. 3 in the near term, as Jason Stephens expects.
- Any count of how many of the roughly 376,000 filers change residency or reschedule income, which American Banker did not report.
Information, not investment advice. This story is general information about companies and markets, drawn from cited reporting. It is not a recommendation to buy, sell or hold any security; check the cited sources before acting.
Clarity's read
What the record supports and how the coverage leans. The claims behind it follow.
Reality
- Evidence55
- Adoption
- Not scored
- Hype gap−15
- Incentives
- Not scored
- Confidence60
Claim ledger
Ranked by verification strength, evidence, and original report placement.
- [1]
Proposition 3 would make permanent California's temporary increase in income tax rates for high earners, which is currently set to expire in 2031.
- [2]
The top marginal income tax rates affected by Proposition 3 range from 10.3% to 12.3%.
- [3]
The top rates apply to income above $361,000 or more for single filers or $721,000 or more for joint filers.
- [4]
Proposition 3 would affect nearly 376,000 individuals, based on 2024 data.
- [5]
The billionaire tax, Proposition 40, would affect about 200 Californians, according to the measure's proponents.
- [6]
Most of the revenue from Proposition 3 would be allocated to K-12 schools and the rest to community colleges.
- [7]
A September survey by the nonprofit, nonpartisan Public Policy Institute of California found 58% of likely voters would support Prop. 3 and 40% would oppose it.
- [8]
Making the rates permanent raises tax planning questions for advisors, including decisions about residency, Roth conversions, and when to time capital gains and other types of income.
- [9]
Proposition 40 is California's proposed one-time tax on billionaires.
- [10]
Samuel Diarbakerly, founder and CEO of Generation Capital Advisors, said: "If you're a good advisor, you should tell your client they should live the life they want to and not live it around taxes."
- [11]
Diarbakerly said: "Now some clients have the prerogative and are principal-bound and say, 'Hey, if I get taxed one more dollar, I am out of here.'"
- [12]
Diarbakerly said clients exposed to these taxes are probably exposed to the highest federal marginal rate and probably also to the net investment income tax.
- [13]
Marc Rosenbach of Atlas Legacy Advisors said voters first approved the temporary increase in 2012, and that with permanence on the table some high earners in the top brackets "feel misled."
- [14]
Jason Stephens of Evertern Wealth said Prop. 3 should be getting a lot more attention than it is, and that he expects it to pick up in the near term because it affects a significant number of people compared with the billionaires' tax.
- [15]
Rosenbach said of the billionaire tax: "Prop. 40 is getting all of the oxygen in the room."
- [16]
Polling indicates Prop. 3 is likely to pass.
- [17]
For clients considering relocation, Diarbakerly said advisors should take a family office approach to changing the client's domicile and coordinate with legal and tax counsel.
- [18]
Proposition 3's reach is about 1,880 times that of Proposition 40 (nearly 376,000 filers against about 200).
- [19]
The September survey's lead for Prop. 3 among likely voters is 18 percentage points.
- [20]
California residents affected by the tax may not leave the state right away, but the prospect of permanently higher rates could factor into relocation decisions over the coming years.
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Sources
1 independent publisher whose own reporting we read for this story.
- americanbanker.comForget the billionaire tax. This California measure could affect 376K taxpayers
1 article · October 16, 2026
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Topics
- California Ballot MeasuresFollow
- Taxation of High EarnersFollow
- Wealth management and tax planningFollow
Entities
- Proposition 3 (California)Follow
- Public Policy Institute of CaliforniaFollow
- American BankerFollow
- California Proposition 40Follow