Gavin Newsom gets behind marijuana tax reform, signaling change to cannabis industry

Facing a possible industry revolt over California cannabis tax structure, Gov. Gavin Newsom on Monday signaled that he is open to rethinking the taxes the state levels on marijuana growers and purchases. The governor included in a budget proposal he released this week that he “supports cannabis tax reform and plans to work with the Legislature to make modifications to California’s cannabis tax policy to help stabilize the market.”

Asked to expand on the language at a press conference, Newsom said, “There was intention by having that language in the budget. It is my goal to look at tax policy to stabilize the market.”

Newsom’s budget projects that the state will collect $787 million in cannabis revenue during the 2022-23 tax year. Of that, the budget estimates that nearly $595 million will be available to be allocated to youth substance abuse treatment, clean-up of illicit cannabis grows and support public safety-related activities. It’s been a bumpy road for legal cannabis in California since voters approved adult-use sales in 2016. Cannabis activity, including cultivation, distribution and retail, remains outlawed in much of the state, as cities and counties have been reluctant to authorize such activities.  Newsom said his goal is “to get these municipalities to wake up to the opportunities to get rid of the illegal market and the illicit market and provide support and a regulatory framework for the legal market.” Newsom’s statements, and budget proposal, came as welcome news to Elizabeth Ashford, vice president of communications for Eaze, a cannabis delivery company. Ashford previously worked for Govs. Jerry Brown and Arnold Schwarzenegger.

“I think Gov. Newsom knows and his advisers know that they can’t let the legal market fail,” Ashford said in a telephone interview after Newsom unveiled his budget proposal.

“It’s extremely important that the steps that state government can take are taken. They need to take these steps.”

Ashford is among the cannabis industry advocates who believes the legal industry is facing an existential threat with a persistent illicit market and an conflicting local regulations.

“This is a complex, important job creation ecosystem in the state. So when we talk about the legal market potentially facing an existential crisis, we’re talking about thousands and thousands of jobs and also millions in revenue,” she said.

Michael Steinmetz, founder of Flow Cannabis Co., one of the largest cannabis brands in the state, also applauded Newsom’s announcement. Steinmetz made headlines last year when he vowed to wage a tax revolt against the state if it failed to initiative industry tax reforms. Steinmetz is among a group of cannabis entrepreneurs and advocates planning rallies at the Capitol, one on Thursday, Jan. 13, and one on Jan. 26.

“We are grateful the governor has heard the cries of large and small business owners, farmers, employees, patients and consumers about the dire state of legal cannabis in California. To the Legislature, we now ask that you too hear our cries and join us on Jan. 13 and 26 as we share our stories on Sacramento’s Capitol steps,” Steinmetz said in an email.