The bill is designed to bolster the regulated cannabis market by reducing the tax burden during its formative years. By suspending the cultivation tax and lowering the excise tax, supporters argue that it could make licensed cannabis products more competitively priced compared to those available in the illicit market. This could encourage consumers to purchase through official channels, ultimately aiming to decrease illegal market activity. Such a shift could lead to increased revenues for state programs funded by cannabis taxation, assuming that legal market sales grow sufficiently to offset the lower tax rates.
Assembly Bill 1948 aims to amend certain provisions related to the taxation of cannabis products in California, specifically targeting the excise and cultivation taxes as established under the Control, Regulate and Tax Adult Use of Marijuana Act (AUMA). Introduced by Assembly members on January 17, 2020, the bill proposes to temporarily reduce the cannabis excise tax from 15% to 11% until July 1, 2023, at which point the rate would revert back to 15%. Moreover, the bill suspends the imposition of the cultivation tax for the same duration, in a bid to alleviate financial pressures on licensed cannabis businesses and stimulate growth in the legal market.
The bill is positioned as a necessary adjustment to existing tax policies that may be hindering the success of cannabis businesses, particularly in a market that is still adjusting to legal standards post-Proposition 64. Opponents may argue that reducing taxes could lead to reduced state revenues in the short term or that it may conflict with long-term public health goals by potentially increasing cannabis access. Thus, while the intent of the bill is to support the cannabis industry, it raises ongoing discussions regarding fiscal policy and public health implications.