TL;DRCalifornia’s $351.7B budget taxes downloaded software for the first time, raising $2B annually. A ballot measure would let the state save more from AI IPO windfalls.
California Governor Gavin Newsom and top Democratic legislators agreed on a $351.7 billion state budget that will extend sales tax to prewritten software downloaded from the web. The tax is expected to raise $900 million for the state and another $1.1 billion for local governments starting in fiscal year 2028 and annually thereafter, according to Bloomberg.
The change applies to software that was previously only taxed when purchased on a physical disc. “Most of us don’t get prewritten software on a physical disc anymore. The whole world is past that, our tax code isn’t,” said state Senator John Laird during a legislative debate on June 18.
Republicans argued the measure raises costs for businesses that rely on software ranging from basic office productivity apps to electronic medical records. “For millions of Californians, this isn’t abstract. This impacts real people, real businesses. This tax could be the difference between making payroll and missing it,” said state Senator Suzette Martinez Valladares.
The 💜 of EU techThe latest rumblings from the EU tech scene, a story from our wise ol' founder Boris, and some questionable AI art. It's free, every week, in your inbox. Sign up now!The budget also places a measure on the November ballot that would allow California to save more money from revenue spikes, such as the IPOs planned by California-based OpenAI and Anthropic. The state’s highly progressive tax structure leaves its finances vulnerable to market downturns, and the budget leaves $35.2 billion across savings accounts with $4.5 billion in the regular reserve.
