Living in California has never been cheap, and with housing and everyday expenses continuing to climb, many residents are keeping a close eye on changes that could further affect their budgets.
Now, the state’s newly approved 2026-27 budget introduces two new taxes that could add to those costs beginning next year. The measures are expected to generate billions of dollars in revenue over the coming years while supporting key state programs.
The new taxes are scheduled to take effect on January 1, 2027, and include a managed care organization tax on health plans and a new sales tax that applies to certain prewritten software. A spokesperson for the California Taxpayers Association described the package to ABC 10 as “the largest tax hike in the state’s history from a dollar standpoint.”
California’s new healthcare tax
The first measure imposes a $ 8.85-per-enrollee-per-month tax (about $106 annually) on managed care health plans between 2027 and 2029. Revenue generated by the tax will be directed to a Medi-Cal stability fund, which helps finance California’s public health insurance program.
The California Department of Finance estimates the measure will generate $575 million during the 2026-27 fiscal year, followed by approximately $2.3 billion annually in both 2027-28 and 2028-29, before declining to about $1.7 billion in 2029-30.
Some health insurance organizations have said the added cost could eventually be reflected in higher premiums for commercial health plans. However, the exact impact on consumers will depend on how insurers respond.
Prewritten software tax
The second measure updates California’s tax code by classifying prewritten computer software as tangible personal property subject to the state’s sales tax. As a result, certain software purchases and subscriptions that were previously exempt could become taxable.
State officials estimate the measure will generate $450 million during the 2026-27 fiscal year, increasing to roughly $900 million annually by 2029-30, in addition to hundreds of millions of dollars in local sales tax revenue.
