Bill to Reduce Cannabis Taxes Introduced in CA

UPDATE 5/25/18 - The bill has failed to advance in the legislature.

March 15, 2018 - Assemblymembers Tom Lackey (R-Palmdale) and Rob Bonta (D-Oakland) have introduced AB 3157 to reduce existing state taxes on cannabis for three years as California implements Proposition 64, which legalized cannabis for adult use.

Assembly Bill 3157 will reduce the state’s excise tax from 15% to 11%. It will also suspend the state’s cultivation tax, which currently charges a flat tax of $148 per pound. Both tax reductions are temporary and would sunset in June 2021 after California’s regulated market has matured and has been fully implemented.

Cal NORML supports AB 3157. "We hear from a lot of consumers, small farmers and businesses who say the current taxes are unsustainable," said Cal NORML director Dale Gieringer.

“California cannabis businesses are making significant investments as they embrace the regulated marketplace while, at the same time, being undercut by unregulated competitors," said Assemblymember Bonta. "AB 3157 reduces the tax burden on the licensed cannabis market during this transition period, keeping customers at licensed stores and helping ensure the regulated market survives and thrives.”

The Fitch credit rating agency estimates that the current cumulative tax rate in California is as high as 45%, including local taxes, which vary by jurisdiction. An analysis of AB 3157 performed by New Frontier Data estimates it will reduce prices for consumers by 9% compared to current tax rates.

Other states with legal adult-use like Washington and Oregon have successfully taken steps to reduce their tax rates and encourage the adoption of the legal market. Washington saw an exponential growth in cannabis tax revenue after it simplified its tax structure and reduced its rates—increasing from $13.4 million in June of 2015 (final month of initial tax rate) to $33.1 million in April of 2017.

AB 3157 is also joint authored by Assemblymembers Ken Cooley (D-Sacramento), Reggie Jones-Sawyer Sr. (D-Los Angeles) and Jim Wood (D-Healdsburg). See the full text of AB 3157.

Photo: Rich Pedroncelli — Associated Press

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