California is cutting taxes on cannabis with new legislation that was signed by Gov. Gavin Newsom on Monday.
Newsom signed Assembly Bill 584, authored by Asm. Matt Haney (D–San Francisco), which eliminates a 25% tax increase on the cannabis industry.
The backstory: The California Legislature got rid of the cannabis cultivation tax three years ago and scheduled tax increases every two years to adjust the cannabis tax rate by a percentage that would generate the amount of revenue that would have been collected with the cultivation tax.
- That turned into a 25% cannabis tax increase in July, raising the rate from 15%.
The big picture: AB 584 reversed the 25% July increase and kept the cannabis tax rate at 15% until 2028.
State of the market: The state reported its cannabis tax revenue numbers for the second quarter of the year last week.
- The cannabis tax brought in nearly $260 million to the state’s coffers in the second quarter, pushing the total revenue for the first half of 2025 to over $500 million.
- California has had over $7.3 billion in cannabis tax revenue since it went into effect in 2018.
What they’re saying: “California’s cannabis economy can bring enormous benefits to our state, but only if our legal industry is given a fair chance to compete against the untaxed and unregulated illegal market,” Haney said. “AB 564 helps level the playing field. It protects California jobs, keeps small businesses open, and ensures that our legal cannabis market can grow and thrive the way voters intended.”
- Newsom added, “We’re rolling back this cannabis tax hike so the legal market can continue to grow, consumers can access safe products, and our local communities see the benefits.”
