California Cannabis Tax Crisis Leaves The Industry On The Verge Of Collapse

California Governor Gavin Newsom may be facing an industry-wide rebellion over California’s cannabis tax structure. A rally held last week outside the State Capitol in Sacramento gathered cannabis advocates, business owners, and small farmers, all of whom were warning that without new measures, the industry could collapse.

Recreational marijuana was legalized in 2016 in order to end the illicit market and create a regulated marketplace. However, years later, the industry is overtaxed and overregulated, and three-quarters of consumers still buy from the illicit market.

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As of January 1, 2022, the cultivation tax increased by almost 5% to reach a flat rate of about $161 per pound, on top of a 15% excise tax and several other taxes for processing and retail. Not only have the small growers been affected, but some of the communities that have been the hardest hit by the war on drugs have as well.

To prevent a possible revolt and collapse, the governor revealed in his 2022-23 budget proposal that he supported the cannabis tax reform. He plans to work with the legislature to make amendments to California’s cannabis tax policy in order to stabilize the market.