California Democrats have advanced tax-related proposals that could lead to higher health insurance premiums and a new tax on software downloads, sending the measures to Governor Gavin Newsom for his expected signature. These proposals are part of the negotiation process for the state's $356 billion budget, which is expected to be finalized within the next two weeks.
Republicans have criticized the measures, arguing they will exacerbate affordability issues in California. State Senator Tony Strickland stated that the majority party has an "addiction to spending" and that the new taxes will "take money out of the pockets of hardworking families."
Health Insurance Provider Tax
One of the key proposals involves extending a tax on healthcare providers, which could generate approximately $2 billion annually starting next year. This measure is intended to offset the loss of federal funding previously secured through a higher tax rate on Medi-Cal providers. Policymakers are now looking to increase taxes on private health insurance plans. According to legislative analysis, this could result in an average annual increase of about $100 for individuals with private health insurance and $400 for a family of four. State Senator Roger Niello noted that hospitals, including Sutter Health, could face an additional $35 million in costs.
Software Tax
Lawmakers also approved a sales tax on software, which is expected to affect products like Slack and Microsoft Suites starting next year. This tax is projected to bring in an estimated $900 million annually. Technology groups have opposed this measure, asserting that it could hinder innovation and increase costs for businesses that rely on software.
Governor Newsom's office has not yet commented on the specific measures. Republican gubernatorial candidate Steve Hilton criticized the proposed taxes, calling them an example of the state heading towards "economic disaster" if a new direction is not taken. Hilton has proposed his own tax plan, which includes eliminating income taxes on the first $150,000 of household earnings and raising the flat tax rate to 8%.
State Democrats defended the taxes as necessary for California's financial stability, citing a loss of federal revenue. State Senator Christopher Cabaldon stated the measures are about "responsibly budgeting for the future of California."