California is dealing with a harsh reality as the state’s budget deficit is expected to reach a staggering $73 billion in the next fiscal year.
Governor Gavin Newsom’s proposed budget for fiscal year 2024-25 outlines severe cuts to education, health and human services. For the millions of citizens who depend on these vital social services, California’s looming budget crisis could be crushing.
But as California prepares for new austerity measures, lawmakers should not overlook a crucial source of funding for the state’s social safety net: a thriving technology sector.
New research from my organization, the Progress Chamber, shows that tech industry executives, employees and corporations contribute more than $20 billion annually to state coffers, particularly through employee income taxes and grants. of actions. According to our research, state revenue from technology taxes is also growing by $2.6 million a year.
For context, California’s liquor tax generates nearly $450 million in revenue each year. Each toll on each Bay Area bridge generates about $750 million a year. Even combined, those revenue streams fall well short of the tech industry’s annual marginal growth.
Our research found that tax revenue from technology employees and corporations will grow by $14.3 billion annually over five years, reaching more than $35 billion by 2030. That puts technology tax revenue on par with all revenue. California statewide sales tax.
Tax revenue generated by technology means more than just dollars on a spreadsheet. These funds allow the state government to provide critical public services and employ public sector workers.
According to our analysis, growth in tech sector tax revenue sends enough dollars into California’s education system to pay for 7,341 more teaching positions each year. That’s more than six times the entire teaching workforce of the San Jose Unified School District.
Within five years, tax revenue growth from the tech sector could support 40,000 new teaching jobs, improving the teacher-student ratio in a state facing one of the worst teacher shortages in the country. If these new jobs were distributed across the state in proportion to student enrollment, San Jose Unified could expect to add 177 teachers, all supported by growing tax revenue from the tech sector.
California’s healthcare system receives a $614 million annual boost from growth in technology tax revenue, supporting nearly 15,000 more healthcare jobs each year. This funding strengthens programs like Medi-Cal, which serves 14 million Californians, and improves access to behavioral health and crisis response services for vulnerable communities.
Families in crisis and children in foster care are just some of the citizens who depend on state-level human services programs. The growth in tax revenue generated by technology brings an additional $270 million annually to California’s human services sector, supporting family stabilization programs, foster care and emergency food assistance.
Some in the Bay Area condemn the tech industry for exacerbating inequality in California. But the opposite is true: Progressive income taxes on tech industry employees are a major funder of our schools, hospitals, and homeless shelters. And when the tech sector does well, as evidenced by strong stock prices, the state collects even more tax revenue.
California policymakers should encourage the growth of the technology sector to help secure the future of the state’s social safety net.
With new proposals on the table this year that could drive innovation out of the state, including restrictive measures for artificial intelligence startups, state lawmakers should carefully consider how a growing tech industry bolsters California’s revenue streams and work to create frameworks. regulations that encourage innovation. .
Adam Kovacevich is the founder of a center-left tech industry coalition called the Chamber of Progress. He has worked at the intersection of technology and politics for 20 years, leading public policy at Google and Lime and serving as a Democratic aide on the Hill.
