California Gov. Gavin Newsom signed a bill on Monday to roll back a planned tax increase on the state’s legal cannabis industry in an effort to bolster the market and ensure its long-term success.
AB 564 will not only reverse a scheduled 25% tax increase on the cannabis industry but also set the state’s cannabis excise tax rate at 15% until 2028, a news release from the Governor’s Press Office stated.
“We’re rolling back this cannabis tax hike so the legal market can continue to grow, consumers can access safe products, and our local communities see the benefits,” Newsom said.
In addition to the tax break, Newsom’s administration has also taken measures to increase enforcement efforts against illegal operators.
Since 2022, the Unified Cannabis Enforcement Taskforce (UCETF) has seized and destroyed over 317 tons, or over 635,303 pounds, of illegal cannabis, the Governor’s Office said.
Assemblymember Matt Haney (D–San Francisco), who authored AB 564, said the licensed cannabis industry has been in a sharp decline over the past five years, and described it as “dying” in a news release on Monday.
He noted that the 25% tax increase would have threatened closure for many small cannabis businesses, resulting in a wave of consumers opting to turn to the illegal market.
“California’s cannabis economy can bring enormous benefits to our state, but only if our legal industry is given a fair chance to compete against the untaxed and unregulated illegal market,” Haney said.
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