California Introduces New Taxes for 2024
Next year, residents of California will face two new taxes following Governor Gavin Newsom’s approval of a state budget in June, which the California Taxpayers Association has termed “the largest tax increase in state history.”
In response to reduced federal support from the previous administration, Newsom and Democratic lawmakers have agreed to increase health insurance premiums and add fees on software downloads.
Republicans have condemned the tax increases. Senator Roger Niero (R) commented, “Record spending doesn’t equate to a better quality of life. Anyone who’s been in California over the last decade can attest to that. This budget negatively impacts both job creators and workers.”
One proposed measure aims to expand taxes on healthcare providers, potentially generating around $2 billion annually to support Medi-Cal services.
For those with private health insurance, average premiums could climb by approximately $100 per year for individuals, or about $400 annually for families of four. This increase is largely expected as insurance companies shift costs onto consumers.
Concerns are mounting among state Republicans regarding the healthcare tax. They have even urged the Trump administration to intervene, arguing that the increase should receive approval from the Centers for Medicare and Medicaid Services.
The other tax change will categorize “pre-written” software products as personal property, thus subjecting them to California’s highest sales tax rate. Legal evaluations predict that this software tax could bring in around $900 million each year.
California’s basic sales tax sits at 7.25%, but local governments can apply additional taxes, making the overall sales tax rate as high as 12% in certain areas, like Lancaster and Palmdale.
Chris Micheli, a veteran lobbyist, shared, “Whether you purchase the product in-store or download it online, it’ll likely be subject to an additional tax of about 10%, depending on your location in California.”
This new software tax will cover digital products essential for daily use, including business communication platforms like Slack and software tools such as Adobe and TurboTax.
According to the nonpartisan Legislative Analysis Service, while many software fees primarily target business transactions, consumers could still feel the pinch. “Taxing business purchases often leads to higher costs for consumers due to businesses passing on expenses, which can also introduce inefficiencies and further increase costs,” noted economist Seth Kirstein.
In defending the budget, Newsom remarked on the ongoing criticisms. His office stated on X that, “This is President Trump’s tax money. Due to the significant changes imposed last year, alterations to California law were necessary. It’s President Trump who drove up costs, not Governor Newsom!”
