Governor Gavin Newsom signed a bill on Monday to roll back taxes on recreational marijuana, providing relief to California’s struggling legal cannabis industry. The new law temporarily reduces the cannabis excise tax from 19% to 15% until 2028, aiming to help dispensaries facing challenges from overregulation and competition with the illicit market.
The decision comes nearly a decade after California voters legalized marijuana. Despite legalization, the legal market has struggled to outpace its illegal counterpart, with taxable cannabis sales declining from over $1.5 billion in 2021 to $1.2 billion four years later. Legal sales currently account for about 40% of all marijuana consumption in the state, according to the state Department of Cannabis Control.
Governor Newsom stated that rolling back the tax hike will allow the legal market to grow, ensuring consumers access safe products and communities benefit from the industry. According to CalMatters, the excise tax, implemented in 2022, replaced a fee meant to fund social programs, including child care assistance, as per the 2016 legalization ballot measure.
However, the new law has faced opposition from several nonprofits that rely on grants funded by the tax. These organizations argue that the reduction will threaten services for low-income children, substance abuse programs, and environmental protections. Alicia Hamann, executive director of Friends of the Eel River, expressed disappointment, stating that the bill reduces resources needed to address harms caused by the illegal market.
Amy O’Gorman, executive director of the California Cannabis Operators Association, praised the decision, calling it a smart policy that keeps the legal market viable and prevents consumers from turning to untested illicit products.
The law aims to stabilize the legal cannabis industry, allowing it to compete more effectively with the illegal market and fostering long-term growth.
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