Too Broke to Tax: California’s Cannabis Market Gets a “Break”

California’s cannabis industry just got the gift of a tax cut, and like everything in this state, it’s arriving about three years late and $3 billion short.

On September 19, 2025, Governor Gavin Newsom signed Assembly Bill 1138, trimming the excise tax from 19% to 15% for the next three years. The move comes after a half-decade of declining legal sales, a booming illicit market, and more cannabis operators shuttering than opening.

At face value, it’s a lifeline. In practice, it’s like tossing Capri Sun pouches into a FEMA camp.

The Numbers Don’t Lie (They Just Smoke)

• Legal cannabis sales in CA fell from a peak of $5.3B in 2020 to around $4.2B in 2024, according to the Department of Tax and Fee Administration.

• Meanwhile, the illicit market is estimated at $8–10B annually, dwarfing legal sales despite five years of “crackdowns.”

• Cultivators complain wholesale flower prices are still tanking: pounds in the Central Valley dropping to ~$300, far below production costs.

• State excise revenue fell nearly 25% year over year in 2024, hammering programs supposedly funded by cannabis taxes.
  

The new tax rate is expected to “save” operators roughly $400M a year. But considering the market is already losing $1–2B in legal sales annually, the math feels less like a rescue and more like creative accounting at a failing hedge fund.

Investor Spin: The CNBC Version

On a recent investor call, one California MSO exec said:

“This tax relief positions us to re-engage consumers who have been disenfranchised by pricing disparities.”

Translation: “We hope cutting 4% off your $75 eighth will make you forget the guy down the street sells the same flower for $30 with no receipt.”

Analysts immediately slapped “BUY” ratings on companies that were bleeding cash last quarter, proving that cannabis equity research is less about numbers and more about Stockholm syndrome.

The Satirical Reality: Boofonomics Edition

The excise tax cut isn’t a victory. It’s a funeral discount.

Picture California cannabis as a bloated corpse at a closed-casket service. Newsom just walked in, threw a $20 on the coffin, and said, “Do what you can.”

Dispensary owners in Los Angeles celebrated by ordering bottle service, only to realize the savings barely cover a month’s lease. In Humboldt, growers are holding “Tax Cut Festivals” where the main attraction is still bankruptcy paperwork.

And the illicit market? They’re watching with binoculars, laughing so hard they almost forgot to water their hoop houses.

The Bigger Problem

California didn’t get here because of one tax hike. It’s:

• Stacked regulation: cultivation taxes (briefly killed in 2022), city cannabis business taxes (up to 10%), packaging rules, endless testing.

• Local bans: over 50% of municipalities still don’t allow retail, forcing consumers into the illicit market.

• Corporate missteps: MSOs scaling faster than demand, investors treating cannabis like Uber with worse margins.
  

A 4% haircut on excise doesn’t fix structural collapse. It just lets politicians say, “We tried.”

Boofonomics Closing Bell

California isn’t saving cannabis. It’s delaying the obituary.

The state still runs the most expensive, overregulated market in the country. Growers are drowning, retailers are closing, and consumers are buying from their barber’s cousin again. The tax cut is just a headline.

If you want to see the future, don’t look at the State Capitol — look at Craigslist. That’s where the real market lives.