California budget adds tax on health providers and software downloads

California residents will face two new taxes beginning next year after state lawmakers passed a budget that adds a levy on health care providers and applies the state sales tax to software downloads. The health care measure extends an existing tax on providers and is projected to generate about $2 billion a year for Medi-Cal.

Officials said the revenue will offset federal funding reductions. The second measure classifies software products as taxable personal property, a change expected to produce $900 million annually. Downloads of programs such as Slack, Adobe, and TurboTax will be subject to the state's sales tax.

Health insurance costs The California Association of Health Plans estimated the provider tax could raise monthly premiums by $400 for a family of four. The group stated that the added cost comes at a time when residents already face higher expenses for housing, groceries, and transportation.

Software tax enforcement Tax experts said the software levy is difficult to avoid because auditors can use location data to confirm primary use inside the state. An exemption exists for custom-developed software, though questions remain about how much modification qualifies for that status.

State Sen. Tony Strickland questioned whether the increases align with earlier affordability goals. U.S. Rep. Vince Fong said the measures would add to already high living costs.