California Senate Majority Leader Mike McGuire has introduced a bill that would eliminate the tax on cannabis cultivation as early as July.
The bill dropped late Tuesday, just as the debate over cannabis tax cuts is heating up. A group called Save California Cannabis Coalition held a news conference last week that brought together lawmakers, advocates, and members of the cannabis industry to put pressure on Gov. Gavin Newsom and lawmakers to come to an agreement and cut cannabis taxes. They argue that businesses are operating on a razor’s edge due to overtaxation and too much competition from the unlicensed market.
On Wednesday morning, a coalition of youth advocates held a press conference to argue that vulnerable Californians have come to rely on cannabis tax revenue, and that cuts will have a negative impact, specifically, on the state’s children.
Roughly $400 million in cannabis tax revenues are allocated toward youth services in the state’s 2021-2022 budget.
“Cannabis revenues represent a critical funding stream for children living in poverty, children of color, and communities impacted by the War on Drugs. Any reduction in cannabis taxes will directly harm the most vulnerable communities in our state and will deepen racial and economic inequities,” the youth advocates group wrote in a letter to Newsom this week. The group counts Youth Forward, the Alliance for Boys and Men of Color, and Parent Voices as members.
Newsom has indicated support for cannabis tax reform through an announcement related to his budget plan, but details since have been scant.
“Cannabis tax reform requires action from two-thirds of the Legislature and that’s why he has made it clear he intends on working with them to identify a rational solution,” a spokesperson for Newsom told Cannabis Wire by email, in response to questions about where conversations with lawmakers stand.
McGuire’s bill would not simply eliminate the cultivation tax, but would simultaneously increase the cannabis excise tax. From July 2025 to July 2026, the increase would “generate half the amount of revenue that would have been collected pursuant to the cultivation tax.” Then, starting in July 2026, the increase would be such that it would “generate the full amount of revenue that would have been collected pursuant to the cultivation tax.”
It is too soon to tell whether this particular proposal will be one that unites each side of the debate. And, other legislative solutions may emerge. During the Save California Cannabis Coalition event last week, Assemblymember Blanca Rubio said she is “committed” to working on legislation to suspend the cannabis cultivation tax and lower the excise tax so that “all licensees, including social equity, can be sustainable.”
During Wednesday’s news conference, speakers highlighted that cannabis tax revenue, allocated through Proposition 64, provides childcare funding for more than 20,000 children that live below the poverty line. And even with the boost from cannabis tax revenue, some families remain without childcare, because roughly 2.3 million children are eligible for childcare subsidies, but only 11% are accessing the funds.
“While we are in a moment of surprisingly huge budget surplus, that moment will be gone. And all of us who went through the many years of budget cuts, fighting budget cuts, we’ll be back out there before we know it,” said Jim Keddy, executive director of Youth Forward. “That’s why this revenue stream is so critical, and that’s why we’ve all come together here to defend it.”
Lynn Silver, a pediatrician and director of Getting it Right from the Start, a program of the Public Health Institute, said that the proposed cannabis tax cuts “violate the intent” of the voter-passed Prop 64. Silver was also a member of the stakeholder advisory group for Prop 64, also funded by cannabis tax revenue.
“Legalizing cannabis should be about social justice, about fewer people in jail and about capturing tax revenue to support our use in the ways that we just described. Not about maximizing profits,” Silver said. “Proposition 64 passed by promising to protect our kids and that the tax revenues would go to the public good.”