California, which already has the highest taxes in the nation, has finally decided to just go all in and tax drinking water. We'll repeat that: Drinking water in California could soon be taxed. Lawmakers in the state of Californistan have proposed more than $6.2 billion worth of tax increases, according to the California Tax Foundation (CTF). Democratic Gov. Gavin Newsom has submitted a $209 billion budget that would set aside nearly $20 billion in a reserve fund.