CaCOA Makes Urgent Case Against Cannabis Excise Tax Increase at Revenue & Taxation Hearing

Laura Braden
May 5
2 min read

Updated: May 7

The California Cannabis Operators Association (CaCOA) delivered powerful testimony before the Assembly Revenue & Taxation Committee on May 5, 2025, in support of AB 564 (Haney), which would halt the scheduled increase in the cannabis excise tax from 15% to 19% set to take effect July 1, 2025.

Amy O'Gorman Jenkins, representing CaCOA, made a compelling case that California's legal cannabis market is not merely struggling but "in crisis," and that raising taxes now would accelerate its collapse.

The bill passed out of committee (5 yay and 1 non-voting) and will now be taken up by the Assembly Appropriations Committee.

"Let me be very clear: the legal cannabis industry is not stable. It is in crisis. And the suggestion in the committee analysis that this crisis is overstated is, respectfully, wrong," Jenkins testified.

Jenkins cited alarming market analysis from Whitney Economics, which recently "slashed its five-year U.S. cannabis retail forecast by $21 billion" due to states like California "losing market share due to high taxes, weak enforcement, and the spread of untaxed, intoxicating hemp products."

The testimony highlighted stark disparities between California's tax structure and other states and industries:

California's excise taxes and licensing fees are 124% and 162% higher, respectively, than Michigan's.
Altogether, cannabis taxes and fees in California amount to 77.5% of wholesale value, compared to just 8.4% for alcohol and 29.5% for tobacco.

"That's not a sustainable framework — it's a roadmap to collapse," Jenkins stated.

Jenkins provided compelling evidence that this collapse is already underway:

12,600 cannabis jobs were lost in 2022, followed by another 5,000 in 2023.
7,100 cultivation licenses have vanished. 60% of manufacturing licenses are gone, taking over 1,000 heritage California brands with them.
Last month, one of the state's oldest dispensary chains — pulling in over $100 million in annual revenue — entered receivership.

Jenkins further noted the industry now owes "over $980 million in outstanding taxes, penalties, and interest," which she characterized as "not tax evasion — that's a collapse in the ability to comply under an unworkable system."

"This is not market consolidation. This is market failure," Jenkins emphasized.

The testimony drew attention to the fiscal irresponsibility of raising taxes at this juncture, noting that "even a modest 10% drop in legal sales would result in more than $13 million in lost state revenue (which includes sales as well as excise taxes) — undoing the very gains the tax hike aims to achieve."

Jenkins also reminded the committee of Proposition 64's intent, which she noted "references — no fewer than five times — that taxes must be structured to ensure the legal market outcompetes the illicit market."

Yet the opposite is occurring:

An estimated 11.4 million pounds of illicit cannabis are produced annually, dwarfing the 1.4 million sold legally.
Hemp-derived THC products continue to flood the market — unregulated, untaxed, and accessible to minors.

Jenkins concluded by emphasizing that "AB 564 is not a tax break. It's economic triage. It's a policy correction to prevent mass closures, protect public health, and stabilize the marketplace that California voters supported in Prop. 64."