Lawmakers and State Treasurer Renew Legislative Push to Reform Cannabis Taxes to Combat Illicit Market and Support Licensed, Regulated Market

Friday, January 17, 2020

Asm. Bonta Renews Legislative Push to Reform Cannabis Taxes to Combat Illicit Market and Support Licensed, Regulated Market

SACRAMENTO - Assemblymember Rob Bonta (D-Oakland) has introduced AB 1948, which will fight the illicit cannabis market by incentivizing consumers to purchase the product from licensed and regulated businesses.

AB 1948 would reduce existing state taxes on licensed cannabis for three years as California’s cannabis industry struggles to get established.

This bill would reduce the price disparity between legal cannabis businesses and illicit market sources.

“The illicit market continues to undercut businesses that are complying with state regulations and doing things the right way,” said Bonta. “AB 1948 will temporarily reduce the tax burden on these licensed operators to attract customers to licensed businesses and help ensure the regulated market survives and thrives. Other states have shown that this approach actually increases overall tax revenue."

“The report on California’s licensed cannabis marketplace delivered by the Legislative Analyst’s Office delivered a clear message that the status quo is not working,” said Bonta. “I was pleased to see the report recommends eliminating the cultivation tax as we call for in AB 1948. We must lower and simplify the taxes on cannabis if the regulated cannabis industry in California is to survive, let alone thrive.”

“The illicit market continues to annihilate the regulated market,” said Assemblymember Tom Lackey (R-Palmdale), joint author of AB 1948. “We continue to witness the destruction of untested products in our communities. It’s time we give the good players a chance to succeed because the health and safety of our communities depend on it.”

AB 1948 will suspend the state’s cultivation tax and reduce the excise tax from 15% to 11% for a period of 3 years.

Two previous legislative efforts have been made to reform the state’s cannabis taxes: AB 3157 (Lackey) in 2018 and AB 286 (Bonta) in 2019. Both bills were held in Assembly Appropriations.

AB 1948 is also jointly authored by Assemblymembers Jones-Sawyer and Cooley, and sponsored by State Treasurer Fiona Ma.

“As the Chair of the Assembly’s Public Safety Committee, I have deep concerns over the growth of the illicit cannabis market,” said Assemblymember Reginald Byron Jones-Sawyer, Sr. (D-South Los Angeles). “Illegal cannabis operators undermine the health and safety regulations established by the Legislature and approved by voters. Only 170 of the estimated 1,700 cannabis dispensaries operating in Los Angeles are properly licensed putting law-abiding businesses at a disadvantage. This bill is crucial to help enforce and further regulate the industry - penalizing those who work outside of the law and rewarding those operators who play by the rules.”

“High taxes have created a hostile legal cannabis market, which simply can’t compete with prices on the black market,” said Treasurer Fiona Ma. “This bill is needed to help cannabis businesses transition into the marketplace, just like we would for any startup industry.”

Assemblymember Rob Bonta represents the 18th Assembly District, which includes the cities of Oakland, Alameda, and San Leandro and is the Assistant Majority Leader.