California is paying a price for the shaky rollout of its legal recreational marijuana market.
State budget documents show Gov. Gavin Newsom’s administration is sharply scaling back what it expects to collect in cannabis tax revenue through June 2020 – in all, a $223 million cut from projections only four months ago.
The state projects the 15% cannabis excise tax will pull in $288 million for the fiscal year that ends in June and $359 million the following year. Those are cuts of $67 million and $156 million, respectively, from the governor’s January budget forecast.
The diminished optimism for retail cannabis sales comes as a thriving illicit market continues to undercut licensed shops, where consumers can avoid taxes that can approach 50% in some communities.
Meanwhile, state regulators have struggled to meet the demand for licensing, and many communities have either banned commercial marijuana sales or not set up rules for legal cannabis businesses to operate within their borders.
It now appears certain California will fall short of earlier projections, when officials expected to collect $1 billion in new tax revenue annually from marijuana within a few years of the program’s launch.
The state Finance Department said it reduced the excise tax projection based on the marijuana industry’s lack of growth in the final quarter of 2018 and the limited number of places where legal cannabis companies are allowed to operate.
– Associated Press