A new bill would prevent a 25% increase of the cannabis tax in California as people continue to turn to the illicit market instead of going to legal dispensaries.
Asm. Matt Haney (D–San Francisco) introduced a bill to prevent a scheduled tax increase for July.
The big picture: The upcoming July tax increase is due to the Legislature getting rid of the cultivation tax three years ago.
- In its place, the Legislature approved tax increases every two years – starting in 2025 – to adjust the cannabis tax rate by a percentage that will generate the amount of revenue that would have been collected with the cultivation tax.
- Haney’s bill would repeal the requirement to increase the tax rate and keep the existing rate of 15%.
State of the market: While California took in over $1 billion in revenue from the cannabis tax last year, the state reported $219 million in revenue for the fourth quarter.
- That was the lowest return since the first quarter of 2020, with every other quarter in between reporting at least $249 million in revenue.
- Cannabis sales have declined by 19% since 2021, according to the California Cannabis Operators Association.
- California also has over 10,800 cannabis licenses that are inactive or surrendered, which is more than the number of active licences.
- A report from ERA Economics revealed that the illicit market makes up around 60% of all cannabis consumption in California.
What we’re watching: The bill will be heard in the Assembly Revenue and Taxation Committee and the Business and Professions Committee in April.
What they’re saying: “If we continue to pile on more taxes and fees onto our struggling small cannabis businesses, California’s cannabis culture is under serious threat of extinction,” Haney said. “Instead, we should be looking at how we can support this industry which has barely been given a chance to survive after legalization. If we want to support our cannabis industry that drives millions of visitors to California every year, adding more costs makes absolutely no sense.”
