California’s Craft Cannabis Industry May Soon Collapse

Advocates, local farmers, and company owners pushed for a rewrite of California’s cannabis tax code as they fight to survive in the face of increasing operational and regulatory fees.

Participants assembled outside the Capitol in Sacramento to voice their cause and stress that the California cannabis business will fail if prompt action is not taken.

Co-founder and executive director of Supernova Women Amber Senter called out the crisis in the cannabis industry’s crisis, which she says is “on the brink of collapse.”

“Not only has the state fallen short in promises to right the wrongs inflicted upon black and brown communities impacted by the war on drugs, but it has also perpetuated regressive war-on-drugs 2.0 policies through oppressive taxation, which must end,” said Senter in a statement. “This is our cry and plea for help.”

Senter and others have petitioned the Legislature and Governor Gavin Newsom to remove the cultivation and excise tax on businesses in the social equity category.

The Thursday demonstration drew on the pressure generated by industry executives who called for a reform in California’s cannabis taxation.

Cannabis businesses previously told Newsom in a letter that urgent tax cuts and fast growth of retail stores were necessary to stabilize an unsteady market rattled by illegal sellers and cultivators.

Over twenty cannabis directors and supporters for legalization signed the letter in response to years of concerns that the taxed industry is unable to contend with the extensive illegal sector, which gives significantly lower price levels and generates double or triple the revenue of the legal sector.

Policy For Tax Reform And Social Equity

Proposition 64, which voters passed in 2016, was not approved just to generate tax income but to eradicate the illegal market, ensure public health and safety, and establish a responsible industry, the CEOs in the letter. They emphasized that the industry is imploding, and the worldwide leadership and heritage are on the verge of extinction after four years of legalizing sales.

“The opportunity to create a robust legal market has been squandered as a result of excessive taxation,” state the CEOs. “75% of cannabis in California is consumed in the illicit market and is untested and unsafe.”

Operators and analysts assert that small enterprises have been hampered by the state’s tax structure from the beginning. Cannabis is now taxed at a fixed amount of around $161 per pound in addition to a 15% excise tax and municipal production, manufacturing, distributing, and sale taxes.

Newsom, who voted in favor of Proposition 64 as liutenant governor, indicated that assistance might be on the way. When he revealed his proposed budget for 2022-2023, he stated that he favored tax reform for the cannabis industry and intended to work with the Legislature to change policy.

Newsom says his objective is to examine tax policy to stabilize the cannabis market. He also added that it is his goal to show municipalities the possibilities for eliminating the underground market and offer assistance for a legal market system.

Assemblymember Mia Bonta, an Eastern San Francisco Bay area representative, stated that Thursday’s protest on reforming cannabis policies guarantees social justice, equity, and recognition in an industry dominated by whites for years but has harmed primarily black and latino communities.

Crime and Cannabis Businesses

In November, several cannabis companies in Bonta’s area were burglarized, resulting in a loss of around $5 million in the days before Thanksgiving.

Henry Alston, co-founder, and COO of James Henry SF, an Oakland-based cannabis firm, claimed his store was attacked five times during the robbery. He explained that the robbers took everything, including a safe with the company’s tax money.

Casey O’Neill, the owner of Happy Day Farms in Mendocino County, claimed he was a personal witness to the drug war as a generational producer who learned the profession from his parents.

Authorities raided their home where the family was growing 30 plants, prompting them to flee.

O’Niell says he escaped to the north with his brother and pregnant mother.

The day’s trauma, says O’Niell, shaped some of his earliest memories.

O’Neill finds connections between California’s highly controlled cannabis business and his past prohibitionist views more than three decades later.

He said that high taxes deter small businesses from entering the market and disproportionately affect populations severely afflicted by the war on drugs.


By Michael Sands, January 25, 2022