California cannabis industry is on the cusp of ‘collapsing’, business leaders warn Governor

Bethan Rose Jenkins, Cannabis News Writer/Editorial

Governor Gavin Newsom of California has been alerted of the fact that the state’s legal cannabis industry is on the cusp of financial collapse. The warning was directed towards the governor by a number of the state’s acclaimed cannabis companies.

Specifically, cannabis company owners told the governor that “The Golden State” is inching ever closer to the edge of a crisis. In an attempt to stabilize the marketplace, Gov. Newsom is being urged to cut tax rates and increase the number of retail outlets across California.

Signed by over two dozen executives, the written warning has been brewing for quite some time. Industry officials and cannabis legalization advocates have been attempting to establish a solution following years of negative feedback about the harshly-taxed and regulated industry which, they say, struggles to stay afloat alongside the illegal economy

In their letter, the cannabis business owners say that “our industry is collapsing” four years after broad legal sales began. This is a good point, because consumer prices of black market-sold weed are significantly less, whereas sales are normally double or triple the legal business.

Industry leaders urge Gov. Newsom to lift cannabis taxes in California

After highlighting California’s legal cannabis market’s risks, industry leaders requested the instant revocation of a growing tax required by licensed growers. In addition to this, business owners suggested that retail shops be expanded statewide and that industry participants be granted a three-year break from the cannabis excise tax.

“The opportunity to create a robust legal market has been squandered as a result of excessive taxation. Seventy-five percent of cannabis in California is consumed in the illicit market and is untested and unsafe. We need you to understand that we have been pushed to a breaking point,” the industry leaders continued in their letter to the governor.

The letter also described the industry as being “rigged for all to fail.” Approximately two-thirds of the metropolitan landscape across California still lacks a dispensary. The reason why is because the decision has been left up to local governments, all of which are required to authorize cannabis sales and production. 

Governor supports the idea of cannabis tax reform in California

The Governor of California’s attention is certainly worth grasping when it comes to discussing the prospect of making program adjustments. Why? Because he is reportedly a cannabis tax reform supporter who acknowledges the system’s desperate need for updating.

According to Newsom’s spokeswoman Erin Mellon, California’s governor is intent on implementing more robust measures to fight against illegal cannabis production and sales.

It’s clear that the current tax construct is presenting unintended but serious challenges. Any tax-reform effort in this space will require action from two-thirds of the Legislature and the Governor is open to working with them on a solution,” Mellon told reporters.

Some examples of the cannabis companies, groups and executives that signed the letter include the following:

  • CannaCraft
  • California Cannabis Industry Association
  • Flow Kana Inc.
  • Harborside Inc.
  • United Cannabis Business Association in Los Angeles
  • The California division of the National Organization for the Reform of Marijuana Laws (NORML).

Newsom’s upcoming budget proposal which is set to be unveiled in early 2022 could feature the proposals put forward by each of the aforementioned companies.