• State General Fund spending has grown by more than $100 billion in just five years. According to the California Legislative Analyst’s Office, General Fund spending increased by more than $100 billion, rising from $146 billion in 2019-20 to $251 billion in the approved 2026-27 budget.
• More Government Spending Has Not Improved California’s Rankings. The 2026 Nation’s Report Card published by the National Assessment of Educational Progress reports that California significantly lags behind most other states in math, reading, science and writing scores for the three grade levels included in its research (grades 4, 8 and 12).

Citing Federal Highway Administration data, the Consumer Affairs Journal of Consumer Research recently ranked California’s roads as the eighth worst in the United States, with 46 percent of the state’s urban roads and 20 percent of its rural roads in poor condition. The state’s 2026 ranking was significantly worse than its 2025 ranking despite the increases in taxes paid by motorists.

The number of homeless Californians increased 34.6 percent from 2007 to 2024, according to the World Population Review, and now tops 187,000 people – nearly 25 percent of the country’s total homeless population.

• Highest Income Tax Rate. Californians pay the highest top income tax rate in the United States, at 3 percent (rising to 14.6 percent on income that is subject to California’s State Disability Insurance tax). The state’s income tax also affects many small businesses organized as S corporations, partnerships or sole proprietorships because their income is taxed through the personal income tax system. Eight states have NO state income tax.
• Highest State Sales Tax Rate. Californians also pay the highest state-level sales tax. The state-level rate of 7.25 percent (before local taxes are added) is the highest in the country. In many areas of California, the combined state and local sales tax rate exceeds 10 percent (in some areas of Los Angeles County, the combined rate exceeds 11 percent, adding significantly to the cost of purchasing everyday items). Five states have NO state sales tax.
• Highest Gas Tax Rate. Californians also pay the highest gasoline tax in the country. California’s gas excise tax of 63.4 cents per gallon is the highest in the nation and is part of the overall tax burden that adds more than $1.70 to the cost of each gallon of gas purchased in this state. California’s excise tax goes up every year on July 1 and has increased more than 34 percent just since 2020.
• The budget still relies on short-term fixes. The 2026-27 budget relies on reserves, internal borrowing, and deferrals rather than permanent spending reforms.

• Lawmakers enacted historic, record-high tax increases. The 2026-27 budget includes billions of dollars in ongoing new revenue each year from a tax increase on managed care organizations, limits on business tax credits and the expansion of sales tax to digital prewritten software and Software-as-a-Service (subscriptions to use programs through a web browser rather than having them installed on your computer).
• Taxes have an impact on job opportunities. Payroll is a key factor in qualifying for California’s research-and-development tax credit, because wages paid to scientists and engineers are often one of the largest eligible expenses. By placing new limits on the R&D tax credit, California is putting these jobs at risk.
• Massive tax increase on software. California’s new tax on software and Software-as-a-Service increases the cost of essential business tools, including accounting, payroll, and cybersecurity. Taxing these business inputs also creates tax pyramiding, meaning the tax gets embedded in prices throughout the production chain and ultimately gets passed along to consumers.

• California imposes one of the nation’s highest corporate income tax rates. California’s 8.84 percent corporate tax rate is among the highest in the country. At the same time, a law passed this year limits business tax credits, including the research-and-development credit, California Competes credit, and film tax credit, resulting in a tax increase.
• New taxes do not stop with businesses. Taxes on employers, software users, health plans and other sectors are paid by all Californians through higher costs, higher prices, reduced investment, slower hiring and weaker wage growth. Those costs ultimately reach California families.

• High-Speed Rail keeps asking for more money without a realistic finish line. California voters approved $9 billion for high-speed rail in 2008, but the project’s costs have continued to grow while the promised statewide system remains far from complete. The Merced-to-Bakersfield segment alone is now estimated to cost roughly $41 billion when borrowing costs are included, with an estimated $2 billion funding gap even before considering whether the project can ever expand beyond the Central Valley. The project’s Office of the Inspector General recently reported that the High-Speed Rail Authority has “obscured basic facts about the project” and is not reporting sufficient information on its use of tax dollars. Sacramento should not ask taxpayers for new taxes while continuing to pour money into projects with shifting timelines, rising costs and no clear path to completion.
• California keeps spending on homelessness without providing results. The 2026-27 budget includes approximately $900 million for the Homeless Housing, Assistance and Prevention Program, even though the state still has not produced the kind of statewide cost-and-outcome reporting needed to show taxpayers what past spending has achieved. The state auditor identified an accountability gap, and the required public reporting on homelessness program costs and outcomes is not due until 2027. Taxpayers are being asked to pay for more spending before the state fully accounts for whether prior spending worked. The number of homeless Californians increased 34.6 percent from 2007 to 2024, according to the World Population Review, and now tops 187,000 people – nearly 25 percent of the country’s total homeless population.
• Local sales tax rate bills would push California’s already-high sales tax burden even higher. California already has the highest state-level sales tax rate in the nation at 7.25 percent, and the Tax Foundation’s midyear 2026 report puts California’s average combined state-and-local sales tax rate at approximately 9.03 percent. Lawmakers continue to authorize local agencies to exceed existing district tax limits, including transportation-related sales tax proposals that could push rates above 10 percent in some communities. The result is higher costs on everyday purchases in a state where affordability already is a central concern. In recent years, the Legislature has repeatedly authorized exceptions to California’s 2 percent cap on local transactions and use taxes, including AB 1768, which permits higher sales tax rates in Los Angeles and Contra Costa counties; SB 63, which authorizes a regional Bay Area sales tax measure; SB 762, which authorized higher taxes in Carpinteria, Hercules, Los Altos, Los Gatos, Pacifica, Palo Alto, Rohnert Park, San Gabriel, San Pablo, Santa Maria, Santa Rosa, Santa Barbara County, and Santa Cruz County; and SB 333, which authorizes a tax above the state cap in the San Luis Obispo region.

• Local tax increases continue to advance at the ballot box. The results of California’s June 2 primary election show that voters approved 55 of 92 local tax and bond measures presented to them, including increases in sales taxes, parcel taxes, hotel taxes, business taxes and school bonds that are repaid via property tax increases. The approved measures equate to $301.7 million a year in new taxes, along with the property tax increases that will be needed to repay $745 million in bonds, plus interest.