California Assembly proposes tax freeze to support struggling cannabis industry

The Assembly Business and Professions Committee of the California State Assembly convened on April 22, 2025, to discuss critical issues affecting the state's cannabis industry, particularly focusing on Assembly Bill 564.

The meeting began with a call to order, followed by a discussion led by Assemblymember Haney regarding the proposed legislation aimed at providing tax relief to California's struggling cannabis sector. Haney emphasized that AB 564 seeks to freeze a planned 25% excise tax increase, rather than reduce the existing tax rate. He noted that this measure is crucial for the survival of the legal cannabis industry, which has been under significant financial strain.

Haney highlighted the challenges faced by licensed cannabis businesses, which currently capture only 40% of the market share, while the illegal market dominates with 60%. He pointed out that the legal industry is at risk of being overshadowed by untaxed competitors, leading to substantial losses in potential revenue for the state. The decline in active cannabis licenses by 18% in 2024 further underscores the urgency of the situation, as many businesses struggle under the weight of excessive taxation.

The Assemblymember argued that the proposed tax freeze is essential to prevent what he termed an "extinction event" for the cannabis industry. He drew comparisons with other states, such as Michigan, which has surpassed California in cannabis sales per capita, illustrating the competitive disadvantage faced by California's legal market.

The committee's discussions underscored the importance of supporting small businesses and maintaining employment within the cannabis sector, reaffirming the commitment made to voters to ensure that cannabis remains legal and accessible in California.

As the meeting concluded, the committee acknowledged the pressing need for legislative action to stabilize the cannabis industry and protect its future in the state. Further discussions and potential votes on AB 564 are anticipated in upcoming sessions.