Five years into legal adult-use cannabis sales in California, and the industry is at “a breaking point.” Top cannabis industry insiders sounded the alarm as the industry teeters towards implosion amid impossible tax rates and other serious issues.
In a letter dated December 17, over two dozen cannabis executives warned California Governor Gavin Newsom, President pro Tempore Toni Atkins and Speaker Anthony Rendon that the state’s cannabis industry is on the verge of collapse.
According to the letter, only major tax cuts and a rapid increase of retail operations can save the industry. Two-thirds of California cities lack dispensaries, since local governments authorize sales and production.
California is set to raise the cannabis cultivation tax next month—despite the Legislative Analyst Office estimating that the state will have a budget surplus of $31 billion next year. On January 1, 2022, the California Department of Tax and Fee Administration (CDTFA) will raise the state’s cannabis cultivation tax for dry-weight flower by almost five percent, raising it to a whopping $161 per pound, and over $10 per ounce. It’s this tax that is exceptionally difficult for farmers who cannot even break even. This was the reason California NORML sent out a warning about the tax hike last month.
The letter provides a solution for some of the immediate problems. Specifically, the industry leaders asked for three things that need to change in order for California’s legal cannabis industry to survive: an immediate lifting of the cultivation tax, a three-year holiday from the excise tax and an expansion of retail shops throughout much of the state.
“It is critical to recognize that an unwillingness to effectively legislate, implement, and oversee a functional regulated cannabis industry has