Setting the Record Straight: AB 564 Protects Both Public Safety and Community Programs

A recent op-ed opposing Assembly Bill 564 (Haney) misunderstands both Proposition 64's intent and how cannabis taxes actually work. The record deserves clarification on both the law's purpose and the economic realities facing California's legal cannabis market.

What Proposition 64 Actually Promised

Proposition 64 laid out 27 different purposes and intents. The number one purpose (the very first words in Section 3) was clear: "Take nonmedical marijuana production and sales out of the hands of the illegal market and bring them under a regulatory structure that prevents access by minors and protects public safety, public health, and the environment."

That central promise was reinforced no fewer than five times throughout the text. Purpose 19 aimed to "tax the growth and sale of marijuana in a way that drives out the illicit market for marijuana and discourages use by minors, and abuse by adults." Purpose 21 sought to "prevent illegal production or distribution." Purpose 22 intended to "prevent the illegal diversion of marijuana."

Make your voice heard: urge California state legislators to VOTE YES ON AB 564.

Generating revenue for environmental restoration, youth programs, and public health was also part of the measure, mentioned once as purpose number 20. Voters were promised both: a safe, regulated market and funding for vital programs. To fulfill that mandate, California must have a functioning legal market that can actually generate sustainable revenue.

How Cannabis Excise Taxes Actually Work

AB 564 addresses consumer pricing because consumers (not cannabis businesses) pay the excise tax. The current tax structure pushes the excise tax rate to 19%, an almost 27% increase. Layered on top of sales tax, local taxes, and compliance costs, this makes regulated products up to three times more expensive than those sold in the illicit market.

AB 564 helps shape whether Californians buy from licensed, tax-paying retailers or from unlicensed operators who pay nothing and follow no safety rules, a distinction that is crucial for protecting both public health and safety, while ensuring sustainable revenue generation.

The Market Reality Demands Action

Since Q2 2021, regulated cannabis sales have fallen by 30%. State excise tax revenue is down 22% since FY 2023-24, with projections for FY 2024–25 already revised from $603M to $594M. Over 12,000 cannabis licenses are now inactive or surrendered, exceeding the number of active licenses statewide (7.928). The industry has lost nearly 22,000 jobs over two years.

Every shuttered storefront and farm represents lost jobs, lost local tax revenue, and fewer dollars for youth programs and environmental protection. Meanwhile, roughly 60 percent of cannabis consumption comes from the illicit market, which pays zero taxes and offers untested, unregulated products.

Michigan provides a telling comparison: with just one-quarter of California's population, they now outsell us in licensed cannabis because they maintain reasonable tax rates that keep consumers in the regulated system.

Protecting Both Public Safety and Programs

The legal cannabis industry consistently supports allocating tax revenues to community investment, youth services, and environmental restoration. Sustainable funding requires keeping consumers in the legal market where their purchases actually generate tax revenue.

Basic economic modeling demonstrates that the 19 percent excise tax rate undermines its own purpose. Even modest declines in legal sales due to higher taxes can erase projected revenue gains, actually reducing funding for community programs.

Proposition 64's core promise was dismantling the illicit market and protecting public safety. AB 564 aligns tax policy with voter intent: keeping cannabis regulated, transparent, and taxed at rates that maintain market viability.

The Path Forward

California must set tax rates that keep consumers in the regulated system, ensure stable long-term revenue, and honor the promises of Proposition 64. AB 564 is the realistic path to achieving this mandate by protecting Californians from dangerous, illicit cannabis while sustaining funding for vital community programs.”

Make your voice heard: urge California state legislators to VOTE YES ON AB 564.

The data supports action, the stakes demand wisdom, and the choice is clear. We can support policies that actually work—delivering both public safety and program funding as voters intended.

Amy O'Gorman Jenkins is the Executive Director of the California Cannabis Operators Association (CaCOA), representing hundreds of licensed cannabis businesses across California.