California Gov. Gavin Newsom adds tax cuts to revised budget proposal

Newsom announced the revision proposal on May 13, which aims to allocate $150 million to “temporarily lower taxes” and simplify the tax structure, while $21 million will go to local governments to improve the presence of the Expand cannabis retail.

Responding to a question from a Bloomberg reporter, Newsom said he was “…addressing the ongoing problem that we expected would be an ongoing problem — and that is how the black market is dealt with, the prosecution of the illegal growers and the illegal ones Operator. ‘ Newsom explained. “Trying to balance on the black market, trying to be flexible about the cost pressures related to the current tax structure and lack thereof.”

“That is [the] Starting a process from my humble perspective, in terms of my thinking,” Newsom continued. “This will be a multi-year process to get this black market, get it on the retreat — not the ascension — and get the retail and responsible adult use market on stable ground.”

In conjunction with Newsom’s statement, the Department of Cannabis Control also released a statement from Director Nicole Elliot. “We have heard from many of you who have said that the current cannabis tax framework is overly complex,” Elliot wrote. “We know that current tax policies place a disproportionate burden on cannabis growers and small businesses and create instability throughout the supply chain, ultimately undermining the societal benefits of a taxed and regulated market.”

She summarized some of the changes in the proposal, including setting the cultivation tax to zero from July 1, strengthening tax enforcement policies, changing the excise tax collection deadline and more. “I’m sharing this information because I wanted you all to know about the work the governor’s office is doing to support our collective efforts,” Elliot concluded. “Creating a sustainable, safe, equitable and legal cannabis market in our state is no small thing – it is a matter of the heart and we must all work together to help make it a reality.”

The Reason Foundation, which promotes libertarian values, recently analyzed the possible consequences of changing the current cannabis tax. Ultimately, the organization recommended repealing or suspending the current crop tax, lowering retail excise taxes, or pursuing other methods to attract local government interest. “Tax costs are an integral part of retail prices, and this analysis shows that a tax cut can make legal products more price-competitive versus illegal products and attract more consumers to the regulated market. This overall market growth will quickly replace the lost revenue resulting from a reduction in tax rates,” the Reason Foundation concluded.

Newsom first unveiled its fiscal 2022-2023 budget proposal in January, stating that it was committed to making positive changes. “My goal is to look at tax policies to stabilize markets; At the same time, my goal is also to get these communities to see the opportunities to eliminate the illicit market and the illicit market, and provide support and a regulatory framework for the licit market,” Newsom said. He announced that $595 million in cannabis tax revenue has been made available to fund substance abuse treatment efforts, environmental cleanup of illegal growing areas, and public safety activities.

In June 2021, Newsom proposed a $100 million package “to be provided as grants to cities and counties to help cannabis companies transition from provisional to regular licenses.” Seventeen cities and counties were selected to receive this grant.

Meanwhile, Assembly Bill 2691 was approved in late April, allowing small cannabis entrepreneurs to bring their products directly to consumers at cannabis farmers’ markets and other special events. According to Assembly Member Jim Wood, who introduced the measure, this will help small cannabis companies meet the various challenges of high taxes and competition from larger companies, and help increase visibility with local consumers.