Politics
If California’s Marijuana Tax Hike Takes Effect Next Month, Consumers And Businesses Will Suffer—But There’s A Solution (Op-Ed)
“California has the opportunity to reclaim its leadership position in the cannabis industry, but only if we make smart policy choices now.”
By Vince C. Ning, co-CEO and co-founder of Nabis
A critical inflection point threatening the world’s largest legal cannabis market currently looms over California’s industry: A scheduled excise tax raise from the current rate of 15 percent to an unprecedented rate of 19 percent is set to take effect on July 1.
When California voters approved adult-use cannabis in 2016, they envisioned a thriving—and equitable—regulated industry. Unfortunately, the reality is that licensed operators are being strangled by regulations that push consumers straight to the illicit market. And despite the legal market generating approximately $7 billion in tax revenue since 2018, this hike would be a devastating blow.
The Reality of California’s Cannabis Market
On the ground in California, the illicit market continues to dominate cannabis sales. According to recent data from the Department of Cannabis Control (DCC), approximately 63 percent of the 3.8 million pounds of cannabis consumed by Californians in 2024 came from unlicensed production—unsurprising when considering the price differential consumers face.
When a consumer purchases cannabis from a licensed retailer, they’re not just paying for the product. They’re paying layers of taxes that can increase the final price by nearly 44 percent in some jurisdictions.
The California Department of Tax and Fee Administration’s (CDTFA) own example shows how a $35 purchase quickly balloons to over $50 due to combined taxes—and that’s before this tax increase. With the planned hike, that same purchase would approach $60.
Not only will consumers feel this increase in each purchase, many small businesses—particularly social equity operators and independent retailers already operating on razor-thin margins—simply won’t survive another tax increase of this magnitude.
Meanwhile, states like Michigan and Missouri are demonstrating steady sales growth thanks to lower taxes and fewer barriers to entry, and they are already exceeding the average per capita cannabis sales of California.
Assembly Bill 564: A Critical Lifeline
The scheduled tax hike is a delayed consequence of AB 195—a 2022 bill that eliminated the weight-based cultivation tax, but included trigger language to automatically increase the excise tax three years later. This was presented as tax relief. But in reality, it merely shifted the tax burden from one part of the supply chain to another, with a delayed increase that now gives consumers even more incentive to shop the illicit market.
Assemblymember Matt Haney’s (D) AB 564 represents our best hope for preventing this impending disaster. The bill would amend state tax and revenue statute to freeze the tax rate at 15 percent until 2030, giving the market time to right size and reevaluate tax regulations.
AB 564’s unanimous support from the Assembly Business and Professions Committee makes it clear: This isn’t a partisan issue—it’s an economic one. If not protected, we risk the devastation of an industry that not only contributes hundreds of millions to our economy, but also employs and supports thousands of Californians’ livelihood.
A Call for Rational Policy
For nearly a decade, I’ve watched California’s cannabis entrepreneurs show incredible resilience—building legitimate businesses, creating jobs and supporting their communities despite mounting challenges. But resilience has its limits. We cannot continue treating this industry as an inexhaustible source of tax revenue while simultaneously handicapping it against illicit competition.
CDTFA has made it clear: Without legislative action, the tax hike is automatic on July 1. Time is running out.
But there is a path forward. Pass AB 564 and reject the excise tax increase. Then, commit to building a fairer, more sustainable tax structure—one that strengthens the legal market, protects consumers and ensures cannabis remains a legitimate, thriving industry in the state that started it all with medical cannabis legalization.
California has the opportunity to reclaim its leadership position in the cannabis industry, but only if we make smart policy choices now—decisively and rationally before it’s too late. The future of California’s cannabis industry depends on it.
Vince C. Ning is the co-CEO and co-founder of Nabis, California’s largest wholesale cannabis distribution platform. Nabis is a founding member of the Financial Stability for California Cannabis (FSCC) coalition, established in 2023.
Photo courtesy of Chris Wallis // Side Pocket Images.
