California’s cannabis market has faced some major growing pains — and taxes have played a big role. Gavin Newsom, the Governor of California, signed Assembly Bill 195 in 2022 to eliminate state cultivation taxes and help growers who were struggling. But the bill contained a ticking-time bomb: an increase in cannabis excise from 15% up to 19% scheduled for 1 July 2025.
At that time, legislators agreed to automatically increase the excise duty if certain revenue targets were not met. Spoiler Alert: The downturn in the cannabis industry made that revenue increase unlikely.
Why the Brakes Are Slamming?
Fast forward to today, and California legislators just overwhelmingly voted 150–0 to repeal that upcoming excise tax hike. The argument they used? The argument? A higher tax will likely drive more people to the illicit market. This is because of its low prices. Even with the current financial stress, licensed businesses barely survive. Adding more pressure to their finances could lead them to disappear.
Groups like the California Cannabis Industry Association and the United Food and Commercial Workers union threw their support behind the repeal effort, making it clear that survival — not greed — was the driving factor.
What Does It Mean for Industry?
The cannabis excise taxes will remain at 15%, instead of going up to 19%. It could help to stabilize the legal cannabis market by keeping prices competitive.
Experts say that the solution is not just about taxes. A full reset — involving licensing reform, local access expansion, and stricter illicit market crackdowns — will be needed if California wants a truly thriving legal cannabis industry.