Cannabis tax cut may hinder child care

A fight over taxes consumers pay for cannabis products has prompted a standoff between unusual adversaries: childcare advocates and the legal weed industry.

- BY JENNY GOLD

SAMANTHA REYES, center, plays with other children outside at a home day care in Lakewood in June.

On July 1, California’s cannabis excise tax increased from 15% to 19% as part of a political deal struck in 2022 to help stabilize the fledgling legal market. But the industry now says the increase is untenable as it faces a sharp decline in revenue and unfair competition from the growing illicit market.

An industry-sponsored bill moving through the Legislature — and already passed by the Assembly — would eliminate the tax increase and lower the rate back to 15% for the next six years. This would reduce by $180 million annually the tax revenue that the state contributes toward law enforcement, child care, services for at-risk youth and environmental cleanup.

The losses include about $81 million annually that would have specifically funded additional subsidized childcare slots for about 8,000 children from low-income families.

“They are choosing the cannabis industry over children and youth,” said Mary Ignatius, executive director of Parent Voices California, which represents parents receiving state subsidies to help pay for child care.

Child care industry faces setbacks

The tension over taxes for legal weed versus child care both industries in crisis-highlights the inherent pitfalls of funding important social services with "sin taxes," whether it's alcohol, weed or tobacco - funding that experts say is often unstable and unsustainable.

The measure's next stop is the Senate. All bills in the Legislature must be passed by Sept. 12, and the governor must sign them by Oct. 12.

"We can both support the legal cannabis industry and protect child care. If the measure reaches the governor's desk and is signed into law, we will work with the Legislature to ensure there are no cuts to child care due to this policy change," said Diana Crofts-Pelayo, a spokesperson for Gov. Gavin Newsom.