California’s tax on marijuana will increase next week, after the lawmakers who approved its budget on Wednesday failed to include any provisions that would delay it.
Last month, state officials said that on July 1 the tax rate for cannabis would go up from 15% to 19%. Advocates hoped that budget legislation could contain similar language to the proposal of Assemblymember Matt Haney(D), who proposed to defer the increase by five years.
But that didn’t occur. This is despite the fact that Gov. MJBizDaily reported that Gavin Newsom (D) supported the inclusion of the tax freeze into the trailer budget bill. Assembly Speaker Robert Rivas, a Democrat, also supported the tax delay. However Senate Pro Tempore Mike McGuire, a Democrat blocked the inclusion of the bill in the budget trailer.
Christopher Cabaldon said (D) that in an appearance before the Senate Budget and Fiscal Review Committee he would have liked to see lawmakers reach an agreement “on the cannabis tax hike.”
“I’m very concerned that this industry—that we’re going to see less revenue as a result of the increase than we would have without it, as well as severely hampering the legal industry and significantly advantaging the illicit and illegal activities around our state,” he said. “I hope that we will continue to work on this issue. The tax increases are scheduled to begin next week. However, this issue still exists.
The delayed implementation under Haney’s separate bill would take effect at the start of 2026, according to the Assembly’s earlier-this-month approved version. The advocates wanted it to be included in budget legislation, because the delayed implementation would have taken effect immediately upon its enactment.
According to the bill, the California Department of Tax and Fee Administration would need to adjust the tax rates on cannabis and cannabis products based upon the additional percentage of gross sales by cannabis retailers that they estimate will produce revenue equal to what would have been collected during the prior fiscal year.
According to information that is available, the department will need to “estimate” the revenue generated by weight-based cultivation taxes in the prior fiscal year.
The measure specifies that “the specific goal of the reduction in the cannabis excise taxes is to provide immediate relief for the cannabis industry.” “The effectiveness of this goal can be measured by lawmakers by the amount in gain or losses of cannabis excise revenue resulting from cannabis tax reductions allowed by this measure.”
It also mandates that CDTFA, on or before December 1, 2026 and each subsequent year the California “submit a report to the Legislature…detailing the amount of gain or loss in cannabis excise tax revenues resulting from the cannabis excise tax rate reduction allowed by this act.”
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California is also inviting proposals from researchers for the second round of grants in a grant program designed to educate policymakers and the public about the marijuana laws that govern the state.
Last month, the Governor’s Office of Business and Economic Development (GO-Biz) announced the recipients of over $52 million in community reinvestment grants to nonprofits and local health departments, also funded by marijuana tax revenue.
That marked the seventh round of cannabis-funded California Community Reinvestment Grants (CalCRG) under the state program.
California legalization has resulted in a new set of grant programs designed to address the negative effects of marijuana prohibition, and foster a robust industry that is well-regulated.
California’s Supreme Court separately delivered a victory for the state’s marijuana program last month, rescinding a lower court ruling in a case that suggested federal prohibition could be used locally to undermine the cannabis market.
The state Supreme Court ruling also came just weeks after California officials unveiled a report on the current status and future of the state’s marijuana market—with independent analysts hired by regulators concluding that the federal prohibition on cannabis that prevents interstate commerce is meaningfully bolstering the illicit market.
The governor did sign a bill in 2022 that would have empowered him to enter into interstate cannabis commerce agreements with other legal states, but that power was incumbent upon federal guidance or an assessment from the state attorney general that sanctioned such activity.
Meanwhile, a California Senate committee recently declined to advance a bipartisan bill that would have created a psilocybin pilot program for military veterans and former first responders.
Michigan’s new bill would legalize psilocybin to treat PTSD
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