No tax relief for California cannabis operators in governor’s initial budget

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If legal California cannabis businesses teetering under the weight of heavy taxes will see any relief this year, it’s unlikely to come from the governor.

In the past, Gov. Gavin Newsom has cut taxes for marijuana operators in the state, signing a 2022 budget that eliminated California’s cultivation tax and capped the excise tax at 15% for three years.

But this year, Newsom is tasked with closing a $38 billion budget deficit.

And, to do that, he is banking on revenue from marijuana taxes, which is projected to exceed $1 billion for the 2023 calendar year once final figures are released.

In his initial $291 billion budget proposal for 2024-25, the governor did not propose any further reductions in cannabis taxes or fees.

However, he did redirect $100 million worth of cannabis tax money away from county jails and juvenile detention halls and toward general state costs.

California’s marijuana legalization law – Proposition 64, which voters approved in 2016 – mandates that at least $670 million of state cannabis tax revenue go toward environmental remediation of areas damaged by illicit marijuana grows, youth drug education and treatment as well as general law enforcement-related activities.

Newsom’s proposed 2024-25 budget includes “a budgetary loan of $100 million from the Board of State and Community Corrections’ Cannabis Tax Fund subaccount to the General Fund,” according to a budget summary released this week.

The excise taxes that California levies on its cannabis industry is being challenged in court by one of the state’s largest marijuana retail chains.