California might lower its marijuana tax, here's why

The California legislature is considering passing a bill that would temporarily grant a tax break to legal marijuana retailers in the state as they struggle to compete with a flourishing black market.

Assembly Bill 286, known as the Temporary Cannabis Tax Reduction bill, would slash state excise taxes for legal marijuana retailers to 11 percent from the current 15 percent for three years. It would also end a cultivation tax altogether for growers until 2022.

Industry leaders warned when California first legalized marijuana that high taxes could make the cost of legal pot too expensive compared to the black market -- and it appears those concerns may have come to fruition.

In its first tax revenue for the industry, the Legislative Analyst’s Office revealed that the industry brought in $84 million in tax revenue, $101 million below projections, in the first six months of 2018. And according to BDS Analytics, Californians spent $500 million less on legal marijuana than they did in 2017 (when it wasn’t legal for recreational purposes yet).

Because marijuana businesses must pay multiple rounds of taxes in the state, they can ultimately end up paying upward of 45 percent in taxes in some parts of the state, according to the North Bay Business Journal.


“We need to do better,” Treasurer Fiona Ma told reporters on Monday, as reported by the North Bay Business Journal. “This is anywhere from a $6 billion to a $20 billion industry in California. So we want to help them … get into the regulated market and come in from the gray market.”