California has taken a rare bipartisan step to ease burdens on its legal cannabis market. Lawmakers just approved a bill that cuts the excise tax on cannabis from 19% down to 15%, effective October 1, and locks that rate in through June 30, 2028. The measure heads next to Governor Newsom, who’s indicated he’ll sign it into law. (turn0view0)

Why this move wasn’t inevitable

The 2022 law required raising the excise tax to 19%, but the legal market pushed back—with licensed operators claiming that high rates pushed consumers toward unlicensed (and untaxed) weed. California has long had a reputation for complicated tax and regulatory burdens in its cannabis sector, unlike many states that balance tax with competitive pricing to undercut illicit markets. (turn0view0)

What changed? A combination of declining legal sales (in part due to sticky costs) and mounting pressure from small businesses. Lawmakers saw falling taxable sales—8-figure drops—and recognized that revenue projected under higher tax rates wasn’t materializing without undermining the market’s viability. (turn0view0)

Trade-offs: revenue lost vs market preserved

This tax cut comes at a cost. Legislative analysis estimates a loss of about $135 million in the first year and $180 million in the second year in excise tax revenue. (turn0view0) That revenue had previously funded a number of social programs—child care for low-income families being among the most visible, per nonprofits speaking out. (turn0view0)

Nonprofits warn that promises to “backfill” lost funding are nice words—but implementation is what matters. Public Health Institute advisors question whether funding for vital services will really survive long-term if tax sources fluctuate. (turn0view0)

Longer term implications for policy and equity

Advocates for reform argue that by lowering the tax, California is preventing further erosion of its legal cannabis market to illicit actors. More competitive pricing could foster growth, help small operators stay afloat, and potentially bring in more total revenue if the market expands enough. (turn0view0)

But others worry about stability. Relying on cannabis taxes to fund services (childcare, public health, social equity programs) creates a vulnerability: when tax revenues fall, those programs suffer. Some suggest California should decouple those services from volatile tax income—creating more stable funding sources. (turn0view0)

What to watch now

• Governor Newsom’s action: Will he sign quickly? Will he commit to fully backing the programs threatened by revenue cuts (especially those serving children)?
• Budget adjustments: How will the state allocate funding for programs that relied heavily on cannabis excise income? Will there be gaps, delays, or cuts?
• Market response: Will this tax cut help slow or reverse the shift back to unlicensed cannabis sales? Or will any increase in legal sales be modest?
• Equity impacts: Will small, minority-owned operators finally see relief, or will larger operators capture the upside more?

Audience Question:

Is lowering the cannabis tax worth risking cuts to social programs—if it means more robust legal market health and fewer unlicensed sellers? What should California prioritize: keeping the legal cannabis industry afloat, or ensuring stable funding for the services that depend on tax revenue?

The post California Lawmakers Show Rare Unity in Granting Cannabis Tax Cut appeared first on Merry Jane.