Low Cannabis Tax Revenue Requires Action to Combat Black Market

Monday, May 14, 2018

SACRAMENTO - Assemblymembers Rob Bonta (D-Oakland) and Tom Lackey (R-Palmdale) issued the following statement on the Governor’s Revised Budget and Legislative Analyst’s Office release of cannabis-related tax revenue:

“In January, state excise tax and cultivation tax revenues were projected to be $175 million for the first two quarters of the year. The actual amount collected in the first quarter of 2018 was only $34 million. If the current trend holds, the state will be over $100 million short of the projection.

“Now, the Governor’s revised budget projects the state will collect $185 million for the 2017-2018 fiscal year and revenue will increase to $630 million for 2018-2019. According to the Department of Finance, this forecast is based on data comparisons with Washington and Colorado and operates under the assumption that more businesses will obtain licenses to operate in the coming months. However, state data actually shows a concerning decline in new business licensing.

“California’s experience in legalizing adult-use cannabis is unlike any other state that has preceded us. The size and complexity of our illicit market means that legal businesses will continue to be financially undercut by operators who do not comply with the law by securing licenses or paying taxes.

“As evidenced by the low tax revenue from the first quarter of the year, we believe the high tax rate currently assessed on licensed businesses will continue to limit the tax revenue. Because illicit operators are able to offer significantly lower prices, many consumers are not buying from legal businesses.

“Going forward, California needs to temporarily lower the tax burden on licensed businesses, as we have proposed in Assembly Bill 3157. Further, the state must take robust action against the illicit market. Governor Brown’s proposal to form a team at the Department of Justice is a good start. However, we must also give local governments resources to shut down illicit operators.”



Assemblymember Rob Bonta represents the 18th Assembly District, which includes Oakland, Alameda, and San Leandro and is the Assistant Majority Leader and Chair of the Asian Pacific Islander (API) Legislative Caucus.

Assemblyman Lackey proudly represents the 36th Assembly District, which contains portions of Kern, San Bernardino and Los Angeles counties, including the communities of Lancaster, Palmdale, Santa Clarita, Quartz Hill, Acton, Boron, Littlerock, Pearblossom, Mojave, Rosamond, California City, Phelan and Piñon Hills.