Californians already shoulder some of the heaviest tax burdens in the country. Starting next year, they will carry two more. Gov. Gavin Newsom approved a state budget in June that includes an extension of a tax on health care providers and a brand-new levy on downloaded and "prewritten" software, a pair of measures the California Taxpayers Association has labeled "the largest tax increase in state history."
Together, the two taxes are projected to pull roughly $2.9 billion a year out of the private economy. The health care provider tax alone could generate about $2 billion annually to fund Medi-Cal. The software tax, which reclassifies prewritten software products as personal property subject to the state sales tax, is estimated to bring in another $900 million a year.
Democratic lawmakers said the taxes are meant to offset federal revenue losses they attribute to the Trump administration. Newsom's press office posted on X that the health care tax change was forced by Washington, not Sacramento. But critics, including the state's own nonpartisan Legislative Analyst's Office, warn that the costs will land squarely on consumers and workers, not on the federal government.
The first measure extends a tax on health care providers that funnels money into Medi-Cal, the state's Medicaid program. On paper, the tax hits providers. In practice, insurers are expected to pass the cost through to policyholders.
Individuals with private health insurance plans could see their rates climb an average of about $100 a year. A family of four could face roughly $400 in additional annual premiums. Those are averages, some plans will see larger increases depending on the carrier and region.
California Republicans have pushed back hard. State Sen. Roger Niello, a Republican, offered a blunt assessment of the broader budget:
"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."
GOP lawmakers also raised a procedural objection, arguing the health care provider tax requires approval from the federal Centers for Medicare and Medicaid Services. This week, California Republicans urged the Trump administration to intervene and block the measure. Whether CMS has formally weighed in remains unclear.
Newsom's office, meanwhile, placed blame elsewhere entirely. His press office posted on X:
"This is Trump's tax, thanks to his Big Beautiful Betrayal HE signed last year, California law needed to be changed. TRUMP hiked your costs, not Governor Newsom!"
The governor's framing asks Californians to believe that Sacramento had no choice, that a state sitting on one of the largest economies on earth was simply forced to raise taxes on its own residents because of a bill signed in Washington. It is a familiar pattern from an administration that has repeatedly deflected accountability when the political heat rises.
The second tax breaks new ground. California will now classify "prewritten" software products, the kind businesses and individuals download every day, as tangible personal property subject to the state sales tax. That means everything from off-the-shelf accounting programs to productivity suites could carry an added charge.
Chris Micheli, a longtime Sacramento lobbyist, told ABC10 what the change means in plain terms:
"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."
California's base sales tax rate is already 7.25 percent, the highest in the nation. Local jurisdictions stack additional levies on top. In Lancaster and Palmdale, the combined rate already approaches 12 percent. Adding software purchases to that base means some buyers could face double-digit tax rates on tools they need to run a business or manage a household.
The nonpartisan Legislative Analyst's Office noted that much of the software charge will mainly apply to business-to-business transactions. That might sound like it spares ordinary consumers. It does not. Seth Kerstein, an economist at the LAO, explained why in a published analysis:
"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."
In other words, even when the tax technically lands on a business ledger, it finds its way to the consumer's wallet, with interest.
The tax increases arrive in a state where the cost of living has already driven hundreds of thousands of residents to relocate. California's policy choices have real consequences on the ground. The state's $20-an-hour fast-food minimum wage left a trail of shuttered restaurants across the Central Valley. Its high-speed rail project has become a monument to fiscal mismanagement, with costs ballooning to $231 billion as lawmakers beg the state to stop digging.
Now Sacramento has decided the answer to its budget gap is not spending discipline but another reach into the pockets of the people who still live there.
Sen. Niello's critique cuts to the core of the problem. Record spending has not delivered a better quality of life. It has delivered higher taxes, more regulation, and a state government that responds to every shortfall by asking residents to pay more, never by asking itself to spend less.
Newsom, for his part, appears focused on a different ledger. Fox News reported that Newsom's political action committee, the Campaign for Democracy Committee, spent over $1.5 million purchasing approximately 67,000 copies of his memoir, "Young Man in a Hurry", roughly two-thirds of the 97,400 total copies sold nationwide. The bulk purchases helped push the book onto the New York Times bestseller list, though the Times flagged the ranking with a dagger symbol indicating bulk-sales influence. Republican California gubernatorial candidate Steve Hilton described the arrangement bluntly: "His PAC dropped $1.56 million of donor cash to buy 67,000 free copies and mail them to anyone who donated any amount."
A governor whose PAC spends seven figures inflating his book sales while signing the largest tax hike in state history is not a governor whose priorities align with the people footing the bill.
Several details remain unresolved. The exact date in June when Newsom signed the budget has not been specified in public reporting. The specific year the taxes take effect, described only as "next year", has not been pinned down precisely. And the status of any CMS review of the health care provider tax remains opaque. Republicans say federal approval is required. If they are right, the Trump administration could block the measure entirely.
It is also unclear which health insurance carriers plan to pass the provider tax through to consumers, and by how much. The $100-per-individual and $400-per-family estimates are averages. Some Californians will pay more.
The software tax raises its own unanswered questions. The LAO said "much of" the charge applies to business-to-business transactions, but the full scope of direct consumer exposure has not been spelled out. For a state that prides itself on being the capital of the tech economy, taxing software downloads is a striking choice, one that could push more companies and buyers to structure transactions outside California's reach.
Newsom has spent recent months positioning himself as a national figure, eager to challenge Washington and audition for higher office. But his record at home tells a different story: a state that spends more, taxes more, and delivers less, and a governor who blames everyone else for the tab.
California's taxpayers didn't ask for the largest tax hike in state history. They got it anyway. And the people who signed it want them to believe it's somebody else's fault.
