California’s Taxation Plans for 2026
Lawmakers and local officials in California are gearing up to impose a slew of new taxes in 2026, affecting a wide range of individuals—from massive corporations to small business owners and everyday consumers.
This summer saw another hike in the gas tax, with drivers given little warning beyond a subtle mention on a low-profile government website.
In Sacramento and San Francisco, officials and union leaders are working on fresh tax proposals aimed at empty rentals and both large and small enterprises.
One of the most debated suggestions is the billionaire tax, which has reportedly led to the loss of trillions in wealth from California.
In Los Angeles, county supervisors capitalized on the ongoing allowances from Gov. Gavin Newsom and the legislature that sidestep the 2% cap on local sales tax. As a result, Angelenos now face a staggering 10.25% sales tax at checkout.
Meanwhile, California’s already high gas tax is set to rise again in July, following the signing of SB1 by lawmakers and former Gov. Jerry Brown in 2017. This legislation ties gas and diesel excise tax hikes to annual inflation rates.
“When you look at the overall picture, California’s tax rates are significantly higher than those of many other states,” noted Jared Walczak, a senior fellow at the Tax Foundation.
With a per capita tax burden of $10,319 annually, California ranks highest in combined state and local taxes, trailing only Washington, D.C. and New York, according to Tax Foundation data.
Nevertheless, the progressive lawmakers in California seem to be aiming for even greater heights.
Proposed tax measures include AB 1790 and adjustments to corporate taxes that would increase burdens on businesses employing millions. Under these plans, some of their global income would fall under California’s jurisdiction.
Additional proposals are in the pipeline, including penalties for employers based on certain employee metrics, such as the number of workers dependent on government health insurance.
According to Dave Klein, a spokesperson for the California Taxpayers Association, tax diversity is escalating, especially at the state level. “This isn’t just about increasing sales or income taxes for all; it’s becoming more focused,” he remarked.
Democratic representatives from across California are proposing many of these tax initiatives as a response to President Trump’s “Big Beautiful Bill,” which reduces state funding.
There’s a projected budget deficit in California ranging from $3 billion to $18 billion, depending on whether one believes Gov. Newsom’s estimates or the more neutral budget analyses.
However, it’s noteworthy that since Newsom took office in 2019, the state’s budget has surged by $150 billion, reaching $348.9 billion.
“It’s hard for taxpayers to feel that services have improved as much as spending has ballooned,” Klein commented.
The state legislature is considering around $16 billion in new taxes and fees, according to the California Taxpayers Foundation.
Many Californians are beginning to ask: What are we getting in return for all these taxes?
“People’s skepticism toward state and local governments is completely reasonable,” stated John Coupal, president of the Howard Jarvis Taxpayers Association.
In Los Angeles, the county board’s decision to increase the sales tax related to homelessness comes shortly after Measure A, which had already doubled the corresponding tax.
Supervisors claim that a new sales tax initiative could generate around $1 billion annually to address funding shortages in health care, echoing arguments from proponents of the billionaire tax.
This particular proposal represents a first in U.S. history, raising questions about the legality of attempting to alter an individual’s California residency status earlier this year.
Kathryn Berger, the sole dissenting vote on the Los Angeles County Commission, pointed out that the legislature has hesitated to continue due to scandals surrounding the previous sales tax used for homeless services.
“In general, we struggle to keep the promises we make,” Berger told the Los Angeles Times.
Sales and property taxes are just one piece of a larger puzzle. Some major tax increases remain largely unnoticed by the public.
“California’s tax burdens are weighing down the economy, and some new measures could potentially stifle investment, job creation, and economic growth,” Walczak said.
“When people relocate, they’re often motivated by job opportunities, not taxes. California’s tax policies seem to be pushing those opportunities elsewhere,” he added.
