Every California family with private health insurance is about to see their premiums jump by roughly $400 a year, courtesy of what the California Taxpayers Association is calling “the largest tax increase in state history.”
Gov. Gavin Newsom signed off on the state budget in June, greenlighting two massive new taxes that will hit Golden State residents starting next year. The first extends a tax on health care providers expected to generate around $2 billion annually for Medi-Cal. Insurers aren’t going to eat those costs. They’ll pass them straight to customers, with individuals facing average increases of about $100 per year.
The second blow lands on anyone who downloads software. California lawmakers voted to classify “prewritten” software products as personal property, making them subject to the state’s sales tax. In a state where the base rate sits at 7.25% and local jurisdictions can push totals close to 12%, that’s a significant hit.
“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 tax applies to everyday digital tools Americans rely on. Work platforms like Slack. Creative software like Adobe. Even tax preparation programs like TurboTax. Legislative analysts estimate it will bring in $900 million annually.
State Republicans aren’t staying quiet.
“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, as reported by the New York Post.
GOP lawmakers have gone so far as to urge the Trump administration to step in on the health care tax, arguing that the measure requires approval from the Centers for Medicare and Medicaid Services.
Democrats, meanwhile, are pointing fingers at Washington. Newsom’s office took to X to shift blame for the health tax squarely onto President Trump.
“This is Trump’s tax — thanks to his Big Beautiful Betrayal HE signed last year, California law needed to be changed,” the governor’s office posted. “TRUMP hiked your costs, not Governor Newsom!”
But California families won’t care much about the political blame game when their bills arrive.
The nonpartisan Legislative Analyst’s Office warns that while much of the software charge technically applies to business-to-business transactions, consumers will still feel the pain. Economist Seth Kerstein at the LAO explained that taxing business purchases “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, when Sacramento taxes businesses, working families end up footing the bill.
The taxes come as California continues to grapple with budget pressures. Democratic lawmakers framed the new revenue as necessary to offset federal funding losses, though critics argue the state’s spending habits are the real problem.
For families already stretched thin by inflation and the nation’s highest gas prices, another few hundred dollars in taxes and higher software costs won’t help. And for businesses considering whether California is worth the hassle, this budget sends a clear message about Sacramento’s priorities.
The Golden State keeps finding new ways to reach into taxpayers’ pockets.
(Photo by Justin Sullivan/Getty Images)
