California Rolls Back Cannabis Tax Hike to Support Legal Market Growth
California’s legal cannabis industry just got a much-needed boost with the passage of a new law aimed at easing financial pressure on licensed operators. The legislation reverses a recent cannabis tax hike that had been straining the already struggling market. Governor Gavin Newsom signed the measure last week, calling it a crucial step to keep the legal industry competitive against the state’s thriving illegal market.
Why the Cannabis Tax Rollback Matters
Earlier this year, the state’s cannabis tax rate jumped from 15% to 19%, a move that many business owners said pushed consumers toward cheaper, unregulated products. The increase came at a time when the legal market was already losing ground with the Department of Cannabis Control estimating that only about 40% of total cannabis consumption in California comes from licensed sources.
By rolling back the cannabis tax hike, lawmakers hope to make legal cannabis more affordable and accessible. “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,” Governor Newsom said after signing the bill.
Details of the New Cannabis Tax Law
Assembly Bill 564, introduced by Assemblymember Matt Haney (D–San Francisco), freezes the state’s cannabis tax at 15% until 2028. The goal is to give the industry stability and breathing room to compete with the illicit market, which faces none of the regulatory costs or cannabis tax burdens that legal businesses shoulder.
“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. “AB 564 helps level the playing field.”
The cannabis tax freeze ensures that businesses won’t face additional state tax hikes for at least the next four years, allowing them to invest in growth, product quality, and compliance.
Industry Reaction and Future Outlook
Advocacy groups across the state applauded the decision. The Origins Council, a nonprofit representing small cannabis farmers in rural California, was one of several organizations to sponsor the bill. In a statement, the group said, “There’s much more to be done, but AB 564 is a step in the right direction.”
By stabilizing the cannabis tax and reducing financial strain, California aims to strengthen its legal market, encourage consumer confidence, and promote fair competition. As the state continues refining its approach to regulation and taxation, the new cannabis tax law represents a meaningful step toward a sustainable, equitable, and thriving cannabis economy.