By US Media Group

In a significant move for the state’s beleaguered cannabis industry, California lawmakers on Monday voted unanimously to pause an impending 25% tax increase that threatened to exacerbate existing challenges faced by legal cannabis businesses struggling to compete with the black market.*

In a striking 74-0 vote, the Assembly approved Bill AB564, introduced by Assemblymember Matt Haney (D-San Francisco). The legislation effectively prevents the substantial tax increase, set to take effect on July 1, from being imposed during a time when local cannabis businesses are already seeing a sharp decline in sales and tax revenue.

“If we continue to pile on more taxes and fees onto our struggling small cannabis businesses, California’s cannabis culture is under serious threat of extinction,” Haney said in a statement. He went on to underscore a growing concern within the industry that high taxation is driving customers back to illegal sources.

Data from Haney’s office indicates that California’s licensed cannabis market is facing significant challenges compared to other states. While Michigan is reporting steady growth attributed to lower taxes and fewer regulatory hurdles, California’s situation appears dire.

“If we want to support our cannabis industry that drives millions of visitors to California every year, adding more costs makes absolutely no sense,” Haney added, making a case for why preserving this segment of the economy is crucial for the state’s overall health.

In 2016, Proposition 64 was passed by voters, legalizing the possession, cultivation, and sale of cannabis for recreational use, with an initial retail excise tax set at 15%. As noted by Caren Woodson, president of the California Cannabis Industry Association, “Nearly a decade after Californians overwhelmingly approved cannabis legalization, the industry is struggling under the crushing weight of a 15% excise tax. Any increase, particularly a 25% increase, would not only be bad public policy but devastating to operators already on the brink.”

With AB564 passing through the Assembly, the bill now heads to the State Senate for further consideration. The outcome will be closely watched as the fate of California’s cannabis industry hangs in the balance, with the potential to reshape the landscape of legal cannabis in the state for years to come.