California Governor Gavin Newsom has signed a bill aimed at providing relief to the state’s legal cannabis industry, which has struggled to gain traction despite being legalized almost a decade ago. The new law temporarily reduces the cannabis excise tax from 19% to 15% until 2028, reversing a hike that was implemented earlier this year. Proponents of the bill argue that the industry has been hindered by years of overregulation, leaving dispensaries with slim profit margins.
The governor believes that reducing the tax will enable legal businesses to remain competitive and drive long-term growth. The excise tax, which is imposed by the state before sales taxes are applied, was introduced in 2022 as part of an agreement with marijuana companies. The tax was originally intended to generate revenue for social programs, such as child care assistance, as outlined in the 2016 ballot measure that legalized cannabis.
However, the cannabis industry has long argued that the tax has had a negative impact, exacerbating the problem of an illicit drug market that continues to thrive. By reducing the tax, the state hopes to create a more level playing field, allowing legal businesses to compete more effectively and ultimately benefiting local communities.
