Californians will have to pay for two new taxes next year after Gavin Newsom approved the state budget in June in what the California Taxpayers Association described as “the largest tax increase in state history.”
Newsom and Democratic lawmakers agreed on proposals that would raise health insurance premiums and slap a new charge on software downloads in an effort to make up federal revenue loss from an antagonistic Trump administration, Democrats said.
Republicans blasted the new taxes.
“Record spending does not equate to better quality of life, and anyone living in California for the last decade would likely agree. This budget is bad for job creators and workers,” said state Sen. Roger Niello (R).
One measure would extend a tax on health care providers to potentially generate roughly $2 billion a year to help fund Medi-Cal.
Individuals with private health insurance plans could see their rates go up an average of about $100 a year, or $400 a year for a family of four, as insurers look to pass on the costs.
State Republicans have sounded the alarm on the health care tax, even urging the Trump administration this week to intervene. The hike requires the approval of the Centers for Medicare and Medicaid Services, Republicans claimed.
The other tax hike classifies “prewritten” software products as personal property subject to the state’s highest-in-the-nation sales tax. The software tax is estimated to bring in $900 million annually, according to legislative analysis.
California’s base sales tax rate is 7.25%, but local jurisdictions can impose additional taxes. Some areas like Lancaster and Palmdale charge total sales tax rates close to 12%.
“Whether you get the product from the store or download it is all going to be subject to an additional roughly 10% tax, depending on what jurisdiction you are in the state of California,” longtime lobbyist Chris Micheli told ABC10.
The software charge applies to everyday digital products that businesses and people use, from work communication platforms like Slack to artificial intelligence assistants.
Creation tools like Adobe or even tax preparation systems like TurboTax will be subject to it.
Much of the software charge will mainly apply to business-to-business transactions, according to the nonpartisan Legislative Analyst’s Office. But that doesn’t mean consumers won’t be hurt.
“Taxing business purchases, however, can raise costs for consumers even more than a direct tax on consumption.
“This is because businesses often pass such taxes on to consumers anyway, and additionally, such taxes can create inefficiencies that raise costs even further,” wrote Seth Kerstein, an economist at the LAO.
Newsom has defended his overall budget and the negotiations that came along with it. His press office has blamed Trump, for instance, for why the health tax is needed.
“This is Trump’s tax — thanks to his Big Beautiful Betrayal HE signed last year, California law needed to be changed,” his office posted on X. “TRUMP hiked your costs, not Governor Newsom!”