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California’s cannabis market is in crisis—and a planned tax hike could push it over the edge.
On July 1, the state’s cannabis excise tax is set to rise from 15 percent to 19 percent. While this may seem small on paper, the impact is massive. In some areas, consumers already pay nearly 44 percent in combined taxes on legal cannabis. If this increase goes through, a $35 product could soon cost nearly $60 after taxes.
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That price jump doesn’t just hit consumers—it hits small businesses. Independent retailers and social equity operators, already running on razor-thin margins, may not survive. Meanwhile, the illicit market—which accounted for 63 percent of California’s cannabis in 2024—will only continue to flourish.
This tax hike is the delayed result of AB 195, a 2022 bill that eliminated the cultivation tax but triggered an automatic excise tax increase three years later. It shifted the burden from growers to everyone else in the supply chain—including consumers.
Social equity operators, many of whom entered the market under promises of restorative justice and economic opportunity, are especially vulnerable. Without intervention, we risk watching the first generation of diverse cannabis entrepreneurs disappear under the weight of policy failure.
We’ve created a two-tiered reality—where licensed operators pay punishing taxes and fees while illicit sellers operate freely, without oversight or accountability. This contradiction doesn’t just hurt businesses—it erodes consumer confidence and the long-term viability of legalization itself. How is a legal cannabis market supposed to prevail in a regulated system that actively undermines its licensed players?
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Thankfully, a fix is on the table. Assemblymember Matt Haney’s AB 564 would prevent the tax hike. It’s already passed the Assembly Business and Professions Committee unanimously, and now heads to the Appropriations Committee, then to a full Assembly floor vote before moving on to the State Senate.
This is not a partisan issue—it’s economic survival. Without action, we risk gutting the very industry voters legalized: one that has generated $7 billion in tax revenue, created thousands of jobs, and helped bring cannabis out of the shadows.
California can reclaim its leadership in legal cannabis—but only with rational, timely policy. Passing AB 564 is the first step.
*This article was submitted a guest contributor. The author is solely responsible for the content.