“We do not object to how the cannabis tax proceeds are spent.” “You can’t get blood from stone,” is all we are saying.
By Alexei Koseff, CalMatters
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The tax increase for California’s struggling legal cannabis market went into effect Tuesday despite a vigorous industry campaign that sought to stop the hike and won Gov. Brown’s support. Gavin Newsom, a Democrat and others in the political world have supported the tax hike.
The excise tax for weed is 19 percent as of July 1, up from 15 percent—the result of a political deal three years ago that was intended to buy more time for the legal market to stabilize but which cannabis business operators now warn could chase away customers and push them over the edge.
Genine Colman, the founder of Origins Council which represents the small farmers living in Northern California’s historic Emerald Triangle growing region, said: “I never had a feeling like this before.” “People seem to be so worried and deflated about their future. The space is dangerous.
A state excise is the tax that’s levied on an item before any sales taxes. A bill to lower the cannabis tax rate to 15% for six years, is currently moving through the Legislature. Newsom promised to sign the proposal that would stop any tax increases if he received it.
Newsom, who spoke at a press briefing on Monday, said: “I am intimately aware of the discussions around this and I have great confidence we will achieve our stated objectives.”
Cannabis farmers, dispensary operators and consumer groups rallied in the Capitol of the state for many months, arguing that the increase could have a devastating impact on businesses operating at a loss.
Since voters approved recreational marijuana through Proposition 64, the price of cannabis has dropped. This is due to a surge in overproduction while most counties and cities in California remain closed to retail sales. California also struggles to open up its market. According to the California Department of Cannabis Control, legal sales only account for less than 40% of California’s weed consumption.
California’s taxable cannabis sales fell to 1,09 billion dollars in the first three months of 2025. That’s down 30% from the peak sales early in 2021, and it’s the lowest quarter sales since five years.
Cannabis tax to be offset by harms
It’s a crisis for the industry—communities that traditionally relied on cannabis production have collapsed economically—but also a problem for the state’s finances. As California struggles with a mounting budget deficit, tax revenues generated by weed sales are used to fund child care spaces, clean-up efforts, education on substance abuse and DUI prevention.
“This was a poor time to say, ‘let’s starve the state even more,'” said Tom Wheeler, the executive director of the Humboldt County-based Environmental Protection Information Center, which joined a coalition of child care, environmental and tribal advocacy groups to lobby against a tax freeze.
He stressed the importance of upholding the promises made by Proposition 64. This includes the use cannabis tax revenues for programs to offset harms that are caused by the marijuana industry.
Wheeler stated, “I don’t think that the average consumer will notice this.” At what point will we no longer reduce taxes in order to help the industry?
After a 3-year break, the 2022 agreement allowed the state to increase the excise taxes to compensate for lost revenues.
During budget negotiations last month, Newsom—who also wants to begin using cannabis tax revenue for enforcement against illegal cultivation—and Assembly Speaker Robert Rivas, a Democrat from Salinas, supported extending the pause on the excise tax. The two could not come to an agreement with Senate Pro Tem Mike McGuire. McGuire is a Healdsburg Democrat and represents the Emerald Triangle.
McGuire stated in a press release that “taxes for California’s cannabis industry are a trainwreck and have been so for many years.” He also expressed concern about the financial implications of freezing this tax. According to state analysts, increasing the tax from 18 percent to 19% could generate about $180,000,000 per year.
He said: “It is important to recognize that any freezing will result in a budget deficit which could impact on critical programs for the community funded with cannabis tax dollars.”
California could ‘forfeit a huge opportunity’
The cannabis industry has warned that further tax increases will force price-sensitive clients back into the black market. They say this could harm businesses who are already on edge, and reduce the revenue from the cannabis taxes in the future.
Amy O’Gorman Jenkins is the executive director of California Cannabis Operators Association and a lobbyist. She said, “The math doesn’t work.” “We do not object to the spending of cannabis tax revenue. “You can’t get blood from stone,” is all we are saying.
The tax hike is still in effect, so it will be more difficult to repeal.
Assembly Bill 564 which sets the cannabis tax to 15 percent until the end of 2031 was unanimously passed by the Assembly in May. It now awaits Senate consideration.
Matt Haney is the San Francisco Democrat Assemblymember who brought the bill to Governor. He said he would continue to fight to have it approved. He was angry that the Senate had allowed the tax increase to go into effect. This, he claimed, sent the message that cannabis businesses were not encouraged to adhere to the law.
This tax may kill this business and not enough is being done, he added. California will lose an opportunity that should have brought a lot of money to our state.
This article was originally published on CalMatters and was republished under the Creative Commons Attribution-NonCommercial-NoDerivatives license.
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