The cannabis tax increase approved in 2025 has failed to generate the revenue the city anticipated and is instead beginning to impact the legal market. Municipal projections show a shortfall of nearly $1.5 million, while prices for consumers have surged.

A product priced at around $30 can end up costing more than $40 at checkout due to the combined effect of the city tax, state excise tax, and sales tax. This heavy tax burden has led many buyers to purchase cannabis in nearby cities with lower tax rates or to seek alternatives outside the regulated market.

As a result, sales have declined in San Diego, while neighboring municipalities are seeing increased commercial activity, suggesting that the tax hike may be weakening the local cannabis industry rather than strengthening the city’s finances.