Looming Cannabis Excise Tax Hike Threatens North State's Consumers and Legal Market

By David Spradlin, CEO of Goldenhour Collective

While politicians in Sacramento debate budget numbers, North State cannabis consumers and small farmers face a stark reality: a scheduled 25% increase in California's cannabis excise tax set to take effect July 1st that threatens our region's unique cannabis heritage and economy.

• MAKE YOUR VOICE HEARD: It just takes 30 seconds to email your state legislators and ask them to stop the tax hike. The California Cannabis Operators Association has letter templates for consumers/patients and cannabis professionals.

Unlike other states that started with a clean slate, California's cannabis consumers have decades of price expectations established during the Proposition 215 era. For over twenty years, our state operated under a robust medical market that set pricing standards that are still in place today. When Proposition 64 added new taxes and regulations, it wasn't creating a new industry but layering costs onto an existing ecosystem with established price points.

This makes our situation fundamentally different. While consumers in emerging markets like Missouri or Michigan might accept whatever pricing comes with legalization, California consumers have alternatives in a robust illicit market. They know what cannabis should cost because they've been purchasing it at consistent prices for decades.

The impact on North State communities cannot be overstated. Since 2021, licensed cannabis sales have dropped by 34%. The state has lost nearly 18,000 cannabis jobs over two years. Most alarming: there are now more inactive cannabis licenses (10,828) than active ones (8,514), with over 7,100 small farms already closed.

These aren't just statistics. Each represents a family farm, often with generations of knowledge that might be lost forever. When legacy farmers fold, we lose the innovative cultivators who perfected unique strains suited to our region's volcanic soil, high altitudes, and distinctive climate, where hot days and cool nights create the perfect stress for trichome and terpene production.

The Department of Cannabis Control's own economic analysis reveals the severity of our tax burden: cannabis taxes and fees in California amount to almost 78% of wholesale value, compared to 8.4% for alcohol and 29.5% for tobacco. This crushing disparity, banking restrictions, and limited tax deductions create an impossible competitive environment.

As the proposed tax hike pushes prices even higher, more consumers will turn to unregulated sources where products are untested and potentially dangerous. This isn't speculation, research shows cannabis consumers are highly price-sensitive, with even a 1% price differential potentially driving them away from legal dispensaries.

This isn't about industry bailouts. Every dollar of this tax increase will be passed directly to consumers already struggling with rising costs. Ironically, if even 10% of current consumers abandon legal dispensaries due to higher prices, the state will lose approximately $13 million in tax revenue, making this increase fiscally counterproductive.

The people directly affected by this situation understand the stakes. That's why local governments, including the League of California Cities and Rural County Representatives, have joined with labor unions representing cannabis workers and industry groups to support Assembly Bill 564, which would freeze the excise tax at its current 15% rate.

What makes the North State cannabis community special is worth protecting: our multi-generational farmers practicing regenerative agriculture, our small businesses supporting local economies from Mendocino to Humboldt to Siskiyou, and our commitment to sustainable growing methods that protect our region's natural beauty.

For consumers seeking safe, tested cannabis products at reasonable prices, small businesses trying to survive while playing by the rules, and communities that depend on this industry, I urge state legislators to include language freezing the cannabis excise tax at 15% in the 2025 Budget Act.

The stakes couldn't be higher for Northern California's cannabis heritage and the consumers and patients who depend on it.