The Legislature and Governor Gavin Newsom approved $14.3 billion in annual tax and fee increases during the 2025-26 legislative session after state lawmakers considered more than $803 billion in tax and fee hikes, the California Tax Foundation reported October 14.
The foundation’s Tax and Fee Report documents 156 proposals for tax or fee increases, including 67 that were approved by the Legislature and signed into law by Governor Newsom.
The two largest approved taxes are the governor’s proposals that were included in the 2026-27 state budget:
- SB 122 (Senate Budget and Fiscal Review Committee), which imposes a tax on sales of digital prewritten software, regardless of how the product is delivered to the purchaser (including Software-as-a-Service, where the customer accesses the software hosted by the vendor but never takes possession of it), and increases taxes on California employers by limiting the usage of business tax credits. The tax increases are projected to cost taxpayers at least $9.17 billion per year.
- SB 125 (Senate Budget and Fiscal Review Committee), which imposes a tax on health plans estimated to cost Californians $2.3 billion per year.
“When the new taxes and fees approved this session are fully implemented, Californians will be paying $14.3 billion more to their state and local governments, on top of any additional taxes approved in the November election,” California Tax Foundation Research Analyst Caitlin Herring noted. “These new expenses will increase the cost of living in this state just as a new governor takes office and begins grappling with California’s ongoing affordability problem.”
The report also includes the amounts of tax and fee increases supported by individual members of the Legislature. In the Assembly, Robert Garcia voted for the highest dollar amount of taxes and fees, $795 billion, while in the Senate, Lena Gonzalez had the highest total, at $790 billion.
Of the 156 measures that proposed a new tax or fee, the projected cost to taxpayers can be quantified for 48, while fiscal estimates for the remaining 108 were not available to lawmakers or taxpayers as the measures went through the legislative process.
Bills proposing fines or penalties for violating state or local laws are not included in the report, nor are state and local ballot measures like Proposition 3 (the proposed extension of a “temporary” personal income tax increase) or Proposition 40 (the proposed wealth tax) that didn’t require any legislative action.
The Tax and Fee Report is a regular publication of the California Tax Foundation, updated throughout the year to reflect new legislative proposals. The report includes any measure estimated to cost $1 million or more per year in higher taxes or fees.