Newsom has been eyeing the presidency. But his aspirations have proved disastrous.
And Gavin Newsom’s career is over after getting slammed with a $20 billion bill.
California’s Reckless Spending Leaves Businesses Burdened
California remains the lone state failing to repay a staggering $20 billion federal loan taken for unemployment benefits during the pandemic, forcing hardworking employers to shoulder escalating payroll taxes while Governor Gavin Newsom and Democratic lawmakers prioritized other spending sprees.
Next year, businesses will face an additional $42 per employee in taxes to chip away at this massive debt, with costs set to climb annually until it’s resolved— a direct result of state leaders’ decision to divert funds elsewhere rather than responsibly addressing the shortfall.
“This is called the greatest hidden tax,” Rob Lapsley, President of the California Businesses Roundtable, told KCRA’s California Politics 360.
“When you look at the potential penalties that could be imposed by the federal government, from the Trump administration, if we don’t get a handle on this, we could be well up over $400 per employee,” Lapsley said. “That’s our fear.”
While nearly every other state wisely used federal stimulus dollars to settle their COVID-era debts, Newsom and the legislature squandered California’s share on infrastructure projects, homelessness initiatives, and pet priorities—leaving taxpayers and job creators to foot the bill indefinitely.
Business Groups Ignored Amid Mounting Costs
Despite urgent pleas from business organizations for relief through tax rebates this year, Newsom and lawmakers took zero meaningful action, effectively condemning employers to a decade or more of punishing tax hikes that could exceed those seen after the Great Recession.
“Functionally, this means California employers are facing a decade or more of tax increases, with total payments likely to far surpass the [unemployment insurance]-related tax increases following the Great Recession,” a coalition of business groups wrote in a February statement.
Republican lawmakers have rightfully condemned Newsom’s hypocrisy and fiscal irresponsibility.
“Governor Newsom likes to claim he does not support broad tax increases, but by refusing to pay off California’s [unemployment insurance] debt when a surplus was available, the Governor and other Democrats chose to let those tax increases go into effect,” wrote California Senate Republicans in an October analysis.
Newsom proposed a meager $750 million toward the debt in the 2024 budget, only for it to be scrapped—further evidence of misplaced priorities.
Decades of Mismanagement and Fraud Under Democratic Rule
California’s unemployment system has been chronically underfunded since the 1980s, routinely failing to collect sufficient revenue during downturns, yet the state offers relatively generous benefits compared to wages in many cases.
The pandemic exposed these flaws dramatically: entering with just $3 billion in reserves, the state shelled out a record $24 billion in 2020 payments alone—more than double the Great Recession peak.
Compounding the disaster, the Employment Development Department under Newsom’s oversight became a magnet for fraud, admitting to potentially $31 billion in fraudulent claims—the largest taxpayer rip-off in state history—with only $1 billion recovered by mid-2022.
Defenders like Nick Miller, spokesperson for Assembly Speaker Robert Rivas, dismissed it as “a decades-old problem,” while Senate Pro Tem Monique Limón called it “a persistent challenge” and vaguely promised future considerations.
Newsom’s office offered no immediate response, underscoring the administration’s ongoing avoidance of accountability for policies that continue to hammer California’s economy and drive businesses away.
