California cannabis tax squeeze (2018-2022)
California legalized recreational cannabis in 2016, but state excise and cultivation taxes plus local fees pushed effective rates well above 30%. Legal operators struggled to compete with a thriving unlicensed market, and state cannabis revenue came in far below projections.
Legal sales underperformed while the illicit market persisted.
In 2022, California's budget deal suspended the cultivation tax and reduced the excise tax, acknowledging the fee structure was choking the legal market.
Mirrors the trade-off Oregon faced: raising costs on legal operators can shrink the licensed market and reduce, not increase, regulatory revenue.
