Outside Apple's campus in Cupertino
Adam Kovacevich of Chamber of Progress writes that as California braces for new austerity measures, lawmakers should not overlook a crucial source of funding for the state’s social safety net: a thriving tech sector. File photo.

California is grappling with a harsh reality as the state’s budget deficit is expected to hit a staggering $73 billion in the next fiscal year.

Gov. Gavin Newsom’s proposed budget for the 2024-25 fiscal year outlines severe cuts across 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 braces for new austerity measures, lawmakers should not overlook a crucial source of funding for the state’s social safety net: a thriving tech sector.

New research from my organization, Chamber of Progress, shows tech industry executives, employees and corporations contribute more than $20 billion annually to the state’s coffers, particularly through taxes on employee income and stock grants. According to our research, state revenue from tech taxes is also growing by $2.6 billion yearly.

For context, California’s alcoholic beverage tax generates nearly $450 million in revenue each year. Every toll on every bridge in the Bay Area brings in about $750 million annually. Even combined, those revenue streams fall far short of the tech industry’s annual marginal growth.

Our research found that tax revenue from tech employees and corporations will grow by $14.3 billion annually over five years, reaching more than $35 billion by 2030. That puts tech tax revenue on par with all the revenue from California’s statewide sales tax.

Tech-generated tax revenue means more than just dollars on a spreadsheet. These funds enable the state government to deliver critical public services and employ public sector workers.

According to our analysis, growth in tech sector tax revenue sends enough dollars toward 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.

Over five years, tax revenue growth from the tech sector could support 40,000 new teaching jobs, improving the teacher-to-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 tech sector tax revenue.

California’s health system gets a $614 million annual boost from tech tax revenue growth, supporting nearly 15,000 more health care jobs yearly. This funding strengthens programs like Medi-Cal, which serves 14 million Californians, and improves access to behavioral health services and crisis response for vulnerable communities.

Families in crisis and foster children are just some of the citizens who rely on statewide human services programs. Tech-generated tax revenue growth contributes 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 decry the tech industry for exacerbating inequality in California. But the opposite is true — progressive income taxes on tech industry employees are a big funder of our schools, hospitals and homeless shelters. And when the tech sector is doing well, as gauged by strong stock prices, the state collects even more tax revenue.

California policymakers should foster the tech sector’s growth to help secure the future of the state’s social safety net.

With new proposals on the table this year that may drive innovation out of the state, including restrictive measures for new artificial intelligence businesses, state lawmakers should carefully consider how a growing tech industry bolsters California’s revenue streams — and work to create regulatory frameworks that nurture innovation.

Adam Kovacevich is the founder of a center-left tech industry coalition called Chamber of Progress. He has worked at the intersection of tech and politics for 20 years, leading public policy at Google and Lime and serving as a Democratic Hill aide.

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