California looks to boost ‘dying’ cannabis market with tax roll back

on September 22, 2025

California Gov. Gavin Newsom signed a bill to roll back a planned tax increase on the state’s legal cannabis industry in an effort to bolster the market and ensure its long-term success. California Assembly Bill 564 (AB 564) is legislation that eliminates a planned 25% tax increase on the state's legal cannabis industry, maintaining the excise tax rate at 15% until 2028. This measure aims to support the growth of the legal cannabis market and ensure it can compete with illegal operations.

“We’re rolling back this cannabis tax hike so the legal market can continue to grow, consumers can access safe products, and our local communities see the benefits,” Newsom said.

In addition to the tax break, Newsom’s administration has also taken measures to increase enforcement efforts against illegal operators.

Since 2022, the Unified Cannabis Enforcement Taskforce (UCETF) has seized and destroyed over 317 tons, or over 635,303 pounds, of illegal cannabis, the Governor’s Office said.

Assemblymember Matt Haney (D–San Francisco), who authored AB 564, said the licensed cannabis industry has been in a sharp decline over the past five years, and described it as “dying” in a news release on Monday.He noted that the 25% tax increase would have threatened closure for many small cannabis businesses, resulting in a wave of consumers opting to turn to the illegal market.

“California’s cannabis economy can bring enormous benefits to our state, but only if our legal industry is given a fair chance to compete against the untaxed and unregulated illegal market,” Haney said.

It isn't known nor discussed whether continued marijuana legalization or delay of the tax would allay the issue of illegal cannabis cultivation within the state.

About Illegal Cannabis Cultivation

Illegal cannabis grows in California can lead to significant environmental damage, including water diversion that harms local streams and wildlife, as well as pollution from chemicals and waste. These operations often operate outside of regulations, exacerbating issues like habitat destruction and water scarcity, particularly during drought conditions. To stop illegal cannabis grows in California, law enforcement agencies work collaboratively to identify and eradicate these operations, often through programs like the Campaign Against Marijuana Planting (CAMP). Reporting suspected illegal grows to local authorities or the California Department of Fish and Wildlife can also help address the issue.