California lawmakers on Friday shelved a proposal to reduce marijuana tax rates in an effort to help licensed businesses compete with the black market.
The sidelining of the proposal came a week after a report found cannabis tax revenue is far below projections.
The bill, AB 3157, would have reduced the state excise tax on cannabis from 15 percent to 11 percent and suspended a cultivation tax that charges $148 per pound.
“It’s a win for the illegal market, so of course I’m not happy about that,” said Assemblyman Tom Lackey, R-Palmdale, an author of the bill. “Until we bring the price difference between legal and illegal markets closer together, I think tax revenues will continue to be struggling.”
Hezekiah Allen, head of the California Growers Association, said he would continue to pursue tax reform to allow licensed businesses to better compete.
“We are definitely disappointed but not surprised,” Allen said of the Assembly Appropriations Committee’s action. “With the tax revenue coming in so low in the first quarter, it seemed unlikely that a proposal which would further reduce that revenue would be able to pass.”
An analysis by legislative staff said the cuts could have reduced revenue to the state by up to $297 million in the fiscal year starting July 1. Assemblywoman Lorena Gonzalez Fletcher, D-San Diego, the committee chair, said the state could not afford the lost revenue from the proposed tax cuts.
“It was really expensive,” she said.
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