New Jersey Governor Proposes Massive Tax Hike on Cannabis Cultivators as $7 Million Fund Sits Idle

New Jersey’s cannabis industry is in for a financial jolt. Despite already facing a tax increase at the start of the year, Governor Phil Murphy is pushing for a staggering 500% hike on cultivators. If approved, the tax would jump from $40 per pound to $240 per pound—raising serious concerns among industry players.

Murphy’s Proposal: A Steep Climb for Cannabis Taxes

For cannabis growers in New Jersey, the tax burden has already been climbing. At the beginning of 2025, the state’s Social Equity Excise Fee (SEEF) doubled from $1.24 per ounce to $2.50 per ounce ($40 per pound). This was the result of a decision by the Cannabis Regulatory Commission (CRC) last year.

But that increase pales in comparison to what Murphy is now pushing. His Fiscal Year 2026 budget, unveiled last week, proposes a sharp jump to $15 per ounce ($240 per pound). And that’s not all—he’s also calling for a new SEEF tax on intoxicating hemp products at $30 per ounce ($480 per pound).

One thing to note: medical cannabis cultivators won’t be impacted by these changes. The proposed hikes strictly target adult-use cannabis businesses, leaving some industry insiders questioning whether the move is about revenue or regulation.

A Booming Market Faces New Challenges

Murphy’s argument for the tax increase is largely tied to the rapid growth of New Jersey’s legal cannabis industry.

• The state’s adult-use market exceeded $1 billion in annual sales last year.
• Cannabis tax revenue is being used to fund violence intervention programs.
• The governor frames the industry as a success story, turning a once-criminalized product into a financial asset for the state.

“Just five years ago, cannabis was destroying lives—now it’s helping save them,” Murphy said in his budget speech on February 25. But while the governor highlights the economic benefits, businesses are worried about what this means for their bottom line.

The $7 Million Question: Where’s the Money Going?

One major point of contention is a $7 million state fund meant for social equity initiatives, which remains untouched. Created to help communities affected by the War on Drugs, the money has yet to be distributed—despite New Jersey’s thriving cannabis market generating millions in tax revenue.

Critics argue that before increasing taxes further, the state should ensure that existing funds are actually being used effectively. Some question whether the proposed tax hike is necessary or if it’s simply another way to extract more revenue from cannabis businesses.

Industry Backlash and Potential Consequences

Cannabis cultivators and industry leaders aren’t staying quiet about the proposal. Many fear that such a sharp tax increase could lead to:

• Higher consumer prices, potentially pushing buyers back to the illicit market.
• Financial strain on small cultivators, making it harder for them to compete with larger operators.
• Slower industry growth, as higher taxes discourage new investments.

If approved, the tax could make New Jersey’s cannabis cultivation costs among the highest in the country. Some industry experts warn that it may put smaller businesses at risk, favoring multi-state operators with deeper pockets.

What Happens Next?

Murphy’s budget proposal is far from final. Lawmakers and industry stakeholders will have a chance to weigh in before any changes take effect.

For now, cannabis cultivators are watching closely, hoping that state officials consider the long-term impact of these tax hikes before making a final decision.