Assembly committee advances bill to freeze cannabis excise tax after hours of testimony

Assemblymember Haney introduced AB 564 on behalf of cannabis industry stakeholders and asked the Revenue and Taxation Committee to pause a scheduled 25% excise tax increase on the state-licensed cannabis industry.

The bill’s author, Assemblymember Haney, said the measure would “freeze the tax at its current rate” and emphasized it would not lower existing taxes. He told the committee the legal market currently captures “just 40% of the state's entire market” while the illicit market accounts for the remainder and that an additional 25% increase would be “an existential threat” to licensed businesses.

The bill drew a large group of supporters who described sharply declining business conditions. Amy Jenkins of the California Cannabis Operators Association said the legal market is “not stable” and cited an industry forecast and other reports showing lower market share for licensed operators. Kristen Heidelbach of the UFCW Western States Council, a cosponsor, said freezing the excise tax would protect union jobs and prevent further closures, noting UFCW represents more than 5,000 cannabis workers in California.

Industry groups and local governments — including the California Cannabis Industry Association and the city of Sacramento — and multiple local business associations and patients’ advocates testified in support. Speakers cited data offered in committee: a reported 18% drop in active cannabis licenses in 2024, multi‑year declines in sales and tax receipts, job losses in recent years, and CDTFA data noting roughly $980 million in outstanding taxes, penalties, and interest owed by the industry.

Opponents urged the committee to preserve revenue currently dedicated to youth, environment and community programs. Alex Loomer of Resources Legacy Fund, which helped draft the environmental funding sections of Proposition 64, said the Department of Cannabis Control’s market report shows cultivation and units sold have increased in recent years and argued AB 564 would “break the deal” that guaranteed dedicated revenue for youth services, environmental remediation and law enforcement. Youth Forward and a coalition of environmental and tribal organizations also opposed the bill, saying cannabis tax revenues fund childcare, youth programs and environmental repair work in communities most affected by illegal cultivation.

After nearly two hours of testimony and questions, the committee voted to move AB 564, as amended, to the Appropriations Committee. The motion passed on roll call with six ayes and one member not voting.