CA Cannabis Tax Cut: Newsom Rolls Back Excise Tax to 15%

Key information

Law: AB 564 suspends a recent tax increase that raised the cannabis excise tax from 15% to 19% on July 1, 2024; the excise tax returns to 15% through 2028. (Governor’s office)

Purpose: Lawmakers and the governor say the move helps legal businesses compete with untaxed illicit sellers, protects jobs, and promotes safer products. (Marijuana Moment)

Bipartisan support: The bill passed with wide support in the Legislature. (Marijuana Moment)

Reporting and limits: After June 30, 2028, regulators must reassess the rate against revenue goals, but the excise tax cannot exceed 19%. (Marijuana Moment)

Background: why the tax change matters

California’s legal cannabis market has struggled to overtake illegal sales since voters legalized adult use in 2016. High taxes and regulatory costs have encouraged many consumers to buy from the illicit market. Legal retail made up about 40% of all cannabis sales in the state as of 2024; quarterly legal sales slipped from more than $1.5 billion in 2021 to about $1.2 billion in 2024. Supporters argue that lowering the excise tax can help close that gap and support businesses that follow the rules. (LAist; Marijuana Moment)

Newsom’s rationale and sponsor comments

“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 after signing the bill.

Assemblymember Matt Haney, the bill’s author, said, “AB 564 helps level the playing field. It protects California jobs, keeps small businesses open, and ensures that our legal cannabis market can grow and thrive the way voters intended.” Supporters called the change a lifeline for retailers operating on thin margins. (Marijuana Moment)

Industry reaction and economic context

Licensed cannabis businesses and trade groups broadly welcomed the rollback. Many shop owners reported that the earlier tax hike widened price gaps with illicit sellers, making it harder to compete. Supporters say the measure is a pragmatic, market-oriented fix: a targeted tax cut intended to stabilize an taxed industry that has lost market share, with the expectation that growing the legal market will eventually expand taxable sales and stabilize employment in cultivation, retail and distribution. (Marijuana Moment)

Critics and concerns

Not all stakeholders supported the rollback. Some nonprofits that relied on excise-tax revenue warned the cut will reduce funding for programs for low-income children, substance abuse services, and environmental recovery. Environmental groups in the Emerald Triangle — where the state used tax dollars to remediate damage from illegal grows — expressed disappointment and concern that reduced revenue could slow restoration efforts. Lawmakers and the governor pointed to reassessment safeguards, but critics say the immediate loss in receipts will be felt by community programs. (LAist)

Policy details: how AB 564 works

• Suspension: AB 564 suspends the tax increase that took effect July 1, reverting the excise tax to 15% until December 31, 2028. (Marijuana Moment)
• Reassessment: The law requires periodic reassessments of the excise tax rate after June 30, 2028, tied to revenue goals; regulators may not set the excise rate above the 19% high-water mark. (Marijuana Moment)
• Scope: The rollback applies only to the state excise tax; local taxes, fees, and regulatory costs remain, so final retail prices will still vary across California.

Broader context and limitations

The rollback is one element of a broader effort to make California’s legal cannabis market more competitive. The state has explored reforms such as seeking federal guidance on interstate commerce and adjusting cultivation rules, but federal illegality limits major progress. A 4-point excise cut may help, but experts caution it likely won’t fully close the price gap with illicit sellers without stronger enforcement and regulatory simplification. (Marijuana Moment)

Reporting and future adjustment

AB 564 requires tax authorities and regulators to report on the law’s effects and reassess excise policy after 2028 to balance revenue targets with market viability. The reporting aims to provide lawmakers data to weigh fiscal needs against industry health in future decisions. (Marijuana Moment)

Implications for The High Desert, California

Economic impact

High Desert cannabis retailers and ancillary businesses could see relief: lower excise taxes may let dispensaries reduce retail prices, attract customers from the illicit market, and improve margins. Small operators in Victorville, Adelanto and Apple Valley may see improved cash flow, helping job retention and modest expansion. (LAist)

Political consequences

The move reflects a pragmatic, pro-business stance that may appeal to moderates focused on jobs and fiscal responsibility. Local leaders who argued that over-taxation pushes customers into illegal channels can use the law as evidence of responsiveness; officials depending on cannabis funds may face pressure to adjust budgets. (Governor’s office)

Social effects

If sales shift to licensed shops, High Desert consumers could gain wider access to tested products and safety information, reducing risks from unregulated goods. However, programs funded by excise-tax dollars — such as substance use and youth services — may need alternative funding if state distributions decline. (LAist)

Cultural relevance

The High Desert’s mix of conservative values and a growing small-business community means reactions will vary: some will applaud aid to entrepreneurs and local shops; others will worry about potential impacts on social services.

Practical applications for residents

• Consumers may see slightly lower shelf prices and more sales or loyalty discounts at local dispensaries.
• Store owners may use savings to rebuild reserves, invest in compliance, or lower retail prices.
• Residents dependent on state-funded programs should monitor budget notices and local announcements for service changes.

Reporting sources

Primary reporting and source material for this item include: Governor’s office; Marijuana Moment; LAist.

Additional questions for local reporting

• How will city and county budgets in the High Desert adjust if state transfers decline?
• Will local law enforcement and code enforcement step up actions against illicit sellers to complement the tax change?
• Are local dispensaries passing savings to consumers or using them to rebuild reserves and invest in compliance?

Note: This reporting aims to track how the California cannabis tax cut — and the Newsom marijuana tax decision that enabled it — affects the legal market and small businesses across the High Desert.