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Assembly committee pauses bill to freeze cannabis excise tax after contested hearing
Summary
The California Assembly Revenue and Taxation Committee referred AB 564 — which would freeze the cannabis excise tax at its current rate — to the suspense file after a lengthy hearing featuring industry, labor and environmental witnesses on both sides.
Assemblymember Haney introduced AB 564, which would freeze the state cannabis excise tax at its current rate rather than allow a scheduled 25% increase, during the Revenue and Taxation Committee hearing on Oct. 26, 2025. The committee then referred the bill to the suspense file for further review.
AB 564’s author framed the bill as temporary “tax relief to California's struggling cannabis industry by freezing an unprecedented 25% excise tax increase.” He said the bill “simply freeze[s] the tax at its current rate. It does not decrease the existing tax and will not reduce the revenue generated by this tax.”
The bill drew extensive public testimony from industry groups, labor unions and patient and equity advocates who said the legal market is losing ground to untaxed illicit sellers. Amy Jenkins of the California Cannabis Operators Association told the committee the legal market “is not stable” and cited analysts’ lowered national forecasts and state-level data indicating the legal market captures roughly 40% of total consumption. Kristen Heidelbach of the United Food and Commercial Workers Western States Council said the union represents more than 5,000 cannabis workers and warned that job losses would continue without relief.
Opponents focused on the purposes of cannabis tax revenue and recent Department of Cannabis Control (DCC) reports showing increases in cultivation and units sold. Alex Loomer of Resources Legacy Fund said the DCC’s market report shows cultivation up 70% since 2020 and that “in voting for Prop 64, voters were promised that it would generate hundreds of millions of dollars in new state revenue annually” for environmental remediation, youth programs and other purposes. Youth and environmental advocates urged the committee to preserve funding streams for childcare, youth prevention and environmental remediation funded by cannabis tax receipts.
Committee action: After testimony and member remarks, the chair recommended, and the committee approved, referring AB 564 as amended to apply a five-year sunset and added a Section 41 requirement; the motion to pass as amended to Appropriations was moved by DeMayo and seconded by Quirk Silva. The roll call on the motion recorded votes in favor from Gibson, Carrillo, DeMayo, Garcia, Mckinner and Quirk Silva; Ta did not vote. The committee recorded the motion as passed to Appropriations (6–0). The author and proponents will have further opportunity to address the bill in Appropriations and on the suspense calendar.
Why it matters: AB 564 pits two policy goals against each other: (1) industry advocates who say high effective tax burdens and fees are driving legal businesses out of the regulated market, costing jobs and feeding illicit sellers; and (2) advocates for youth, environment and community programs who say cannabis taxes were explicitly dedicated to programs promised under Proposition 64 and that reductions would cut funding for those programs.
What’s next: AB 564 is referred to the Appropriations Committee and placed on the suspense calendar; further amendments and fiscal analyses are expected before the Assembly floor.
