California’s cannabis market has faced some major growing pains — and taxes have played a big role. In 2022, Governor Gavin Newsom signed Assembly Bill 195, which eliminated the state’s cultivation tax to help struggling growers. However, the bill also included a ticking time bomb: a scheduled increase in the cannabis excise tax from 15% to 19%, set for July 1, 2025.

At the time, lawmakers agreed that if cannabis tax revenues didn’t hit certain targets, the excise tax would automatically rise to fill the gap. Spoiler alert: the industry’s downturn made that revenue boost pretty unlikely.

Why Lawmakers Are Slamming the Brakes

Fast forward to today, and California legislators just overwhelmingly voted 150–0 to repeal that upcoming excise tax hike. Their argument? A higher tax would likely push more consumers toward the illicit market, which is already thriving due to lower prices. Licensed businesses are barely hanging on as it is, and adding more financial strain could wipe out even more of the legal marketplace.

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 It Means for the Industry

If Governor Newsom signs off (which seems likely), the cannabis excise tax will stay at 15% instead of jumping to 19%. This move could stabilize the legal market somewhat by keeping prices more competitive with underground sellers.

Still, experts say the real solution lies beyond just 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.

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