Capitol Alert: Jerry Brown wants tax hikes to wealthy, sales to raise $7 billion

Gov. Jerry Brown will ask voters to raise nearly $7 billion annually by hiking taxes on upper-income earners and sales in California over the next five years, according to sources who have been briefed.

The Democratic governor is expected to file his tax initiative for the November 2012 ballot as soon as Friday. He wants the tax plan to help bridge next year's budget deficit, which the nonpartisan Legislative Analyst's Office pegs at $12.8 billion.

Under the measure, California would impose a half-cent sales tax increase starting in 2013 and an income tax hike on high-income earners starting retroactively with the 2012 tax year. Both would expire at the end of 2016.

The upper-income tax hike starts with a 1 percent increase at $250,000 for individuals and $500,000 for joint filers. A separate increase would charge 1.5 percent more on income between $300,000 and $500,000, followed by a third step of 2 percent on income above $500,000 for individuals (with amounts doubled for joint filers). That would increase the tax on millionaires from 10.3 percent to 12.3 percent.

The income tax change generally affects the top 1 percent of taxpaying households, a favorite target of Occupy protesters in recent months. In 2009, the 1 percent threshold of tax filers started at $400,635, according to the Franchise Tax Board.

Sources said the state would dedicate the money to school districts, intended as a way to convince voters who have said in recent polls that they would approve higher taxes for education. But the governor's proposal would still help the state balance its budget, without guaranteeing that the net effect would be an additional $7 billion for classrooms. It would also include some language limiting how much money gets spent on salaries and administration.

The governor also will ask voters to lock in an existing sales tax shift that pays local governments to take over state responsibilities such as housing inmates.