San Diego is the latest city to embrace reduced cannabis taxes to support the legal market. The city council voted last week to reduce the tax rate on cannabis production facilities from 8% to 2%. The policy is aimed at encouraging local production. Dispensaries would still pay 8%.
An Independent Budget Analyst report has warned that San Diego would lose between $2 million and $4 million over the next five years if it implements the cuts. The industry says its assumptions are flawed. Just 19 out of 40-city approved cannabis production facilities have opened in San Diego and, without the tax cut, industry leaders say it will remain that way.
A number of other cities have lowered cannabis taxes in recent years in order to aid the struggling legal market. These include Long Beach in 2019 and Desert Hot Springs in 2021.
The tax cuts will go before the city council for a second vote next month.