Cannabis excise tax expected to raise $77 million in revenue

Assemblyman Jim Wood’s proposed excise tax AB 2243 was approved by the Assembly Revenue and Tax Committee today 5-0 with Republicans not voting. The excise tax was originally proposed as part of Wood’s Marijuana Watershed Protection Act last year before ultimately being dropped as part of the agreement that ultimately led to the Medical Marijuana Regulation and Safety Act.

Assemblyman Wood said, “An excise tax will ensure the revenue stays in the communities where the cannabis is grown.  Our goal is to create resources to manage the environmental and public safety problems we are battling.”

The bill would levy a $9.25 per ounce tax on cannabis flowers, a $2.75 per ounce tax on cannabis leaves and a $1.25 tax on immature cannabis plants from nurseries.  The tiered approach is modeled after the way alcohol is taxed based on the potency of the product. 

Hezekiah Allen from the California Growers Association said, "AB 2243 is the right tax at the right time. This legislation will generate much needed revenue to clean up watersheds, prevent future environmental impacts, and protect the safety of our neighborhoods. Our communities and rivers can't wait." 

Current estimates from the California Board of Equalization project the tax to generate upwards of $77 million annually.  How these funds should be distributed has been hotly contested, currently the bill would designate 30% to the Natural Resources Agency to fund a grant program for environmental cleanup and restoration on public and private lands, 30% to local law enforcement, 30% to fund the multiagency Watershed Enforcement Team, and the final 10% would go for research of the medical marijuana industry.

“Last year the legislature finally laid out guidelines to make the cannabis industry cleaner and safer,” said Wood.  This bill will give us much needed resources to clean up our forests and streams and to make sure we keep the bad actors out of business.”

Any new tax in California requires a 2/3 vote of both the Assembly and the Senate, which means AB 2243 will need support from Republicans in both houses if it hopes to make it to the Governor’s desk.  The bill will be heard next in Assembly Appropriations Committee.