A tax hike on marijuana products in California will take effect next week after lawmakers failed to include provisions to delay its implementation in key budget legislation on Wednesday.
State officials announced last month that the cannabis excise tax rate would increase from 15 percent to 19 percent on July 1, and advocates were holding out hope that the budget legislation would contain language similar to a standalone proposal from Assemblymember Matt Haney (D) to delay the change for five years.
That didn’t happen, however. And that’s despite Gov. Gavin Newsom’s (D) support for including the tax freeze in the budget trailer bill, MJBizDaily first reported. Assembly Speaker Robert Rivas (D) also backed the delay, but Senate President Pro Tempore Mike McGuire (D) reportedly blocked it from the budget legislation.
In a hearing before the Senate Budget and Fiscal Review Committee, Sen. Christopher Cabaldon (D) said he wished lawmakers “had reached an agreement on the cannabis tax increase.”
“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. “So I hope we remain committed to solving that issue. I know the tax increase is scheduled to take effect next week, but that remains a problem.”
Under Haney’s still pending standalone bill, which advanced through the Assembly earlier this month, the delayed implementation wouldn’t take effect until the beginning of 2026. Advocates wanted to see it included in the budget legislation because it would’ve taken effect upon enactment.
The standalone bill would make it so the California Department of Tax and Fee Administration (CDTFA), working with the Department of Finance, would be required to “adjust the cannabis excise tax rate upon purchasers of cannabis or cannabis products” based on the “additional percentage of the gross receipts of any retail sale by a cannabis retailer that the department estimates will generate an amount of revenue equivalent to the amount that would have been collected in the previous fiscal year,” the text says.
The department would need to “estimate the amount of revenue that would have been collected in the previous fiscal year pursuant to the weight-based cultivation tax” and “estimate this amount by projecting the revenue from weight-based cultivation taxes that would have been collected in the previous calendar year based on information available to the department.”
“The specific goal of the cannabis excise tax rate reduction is to provide immediate tax relief to the cannabis industry,” the measure states. “The efficacy of this goal may be measured by the Legislature by the amount of gain or loss in cannabis excise tax revenues resulting from the cannabis excise tax rate reduction allowed by this act.”
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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Meanwhile, California officials are inviting research proposals for a second round of grants under a program meant to better educate the public on the state’s marijuana law and help policymakers make informed decisions on the issue.
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.
Legalization in California has created a number of new grant programs aimed at addressing the consequences of marijuana prohibition and attempting to nurture a strong, well-regulated legal industry.
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.
New Michigan Bill Would Legalize Psilocybin For People With PTSD
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