California Legislature Votes to Roll Back Cannabis Tax Increase

California lawmakers have approved a measure aimed at easing pressure on the state’s cannabis market by undoing a recent tax hike. Assembly Bill 564, introduced by Matt Haney, seeks to cancel the nearly 25% tax increase that went into effect on July 1.

The proposal, which passed the Assembly with unanimous support earlier this summer, cleared the Senate this week with a decisive 39-1 vote. If signed by Governor Gavin Newsom, the bill would restore the cannabis excise tax rate to 15% and keep it at that level until 2028.

Haney argued that piling on additional costs makes little sense for an industry that brings millions of tourists to California each year. The tax hike originated from earlier legislation that eliminated the cultivation tax but built in automatic tax adjustments if state cannabis revenues declined, which they have.

California cannabis businesses already contend with some of the steepest tax burdens in the nation, reaching as high as 45% in certain regions. The financial strain is showing: retailers recently reported an 11% drop in sales during the first quarter of 2025, marking the largest decline in the industry’s history.