Democratic Lawmakers Suggest Major Tax Cuts to Improve California’s Marijuana Tax Revenue

3 months ago

While legal adult marijuana use has become a reality in several parts of the world already, with more considering it, one doesn’t have to be a cannabis news junkie or bookworm to realize the truth in many states: it’s all about the taxes more often than it should for states.

As such it isn’t uncommon to note that the legal price of flowers is often more expensive than the blackmarket price and that regularly also for inferior quality than many had grown accustomed to from their former distributors.

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The state of California is no exception to this and $60 for a quarter is still more common than not. After one year of legal marijuana, the legal price is still undercut by illegal products on the market. The state even came $275 million short of the proposed $670 million in marijuana tax in the budget last year.

One of the main reasons for this are, of course, the ridiculous taxes levied on farmers and also retail outlets. Combined with a thriving grow market in sunny California — and its mountains — the black market is well and truly alive. Contrarily to proposed legal marijuana laws in Portugal there was no obligation to keep the price below the going blackmarket rate.

Licensed marijuana businesses have also complained that the high taxes charged handicap them in their fight with the blackmarket in California.

In order to improve the state’s tax revenue from marijuana, a group of Democratic Assembly members in the Bay Area have proposed major tax cuts for the industry with the hope of kickstarting the economy, and the subsequent tax windfall.

Led by Rob Bonta (Oakland), the bill AB286 seeks to remove the $148 per pound cultivation tax levied on farmers and reduce the state’s 15% excise tax on retail to 11% for the nex three years.

“The black market continues to undercut businesses that are complying with state regulations and doing things the right way”
“AB 286 will temporarily reduce the tax burden on these licensed operators to keep customers at licensed businesses and help ensure the regulated market survives and thrives. This very strategy has been shown to actually increase overall tax revenue in other states.”
Rob Bonta, D-Oakland

The legislation is Bonta’s second effort, afterhea failed with a bill proposed together with Tom Lackey in 2018 (AB3157).

“Right now the illicit market is dominating California’s cannabis industry”
“These are bad people who are making our communities unsafe. We need to give the good guys a chance to succeed, otherwise our one chance at creating a regulated industry will be compromised”
Tom Lackey, R-Palmdale

If the bill passes the industry can look forward to a major uptick and both customers and [new] entrepreneurs will be the main winners, even before the state’s tax coffers fill up more.

While not as stupendous as in the UK where legal medical marijuana needs to be imported from the Netherlands, despite being the second largest producer and exporter, it is ridiculous that new industries and revenue streams are handicapped by shortsighted focus on revenue rather than on growth.

If because of such shortsighted financial focus the illegal, and often violent black market can continue to thrive by undercutting legal offerings, there is only one loser: the customers. And any future potential of any market is doomed.

Hopefully AB286 will pass in California and will also set an example for other states, as well as Canada and other countries looking into legalizing marijuana. Hopefully the state will continue its efforts in improving accessibility in this bill will pass. When California approved the state wide marijuana delivery, even to areas where local regulators had banned the sale of adult use marijuana, it set a clear signal that it wants to create a viable and thriving market.

Let’s hope the next step is the most logical and also viable to generate a real uppick of a new industry: reducing taxes and thus also end user price.

Bonus

Read Alex Halperin, WeedWeek and regulator contributor to the Guardian, excellent rebuttal of anti-marijuana book “Tell Your Children” in his latest column for the Guardian.


Bonta’s announcement can be read on the website of the Assembly member of District 18.

Tags: #california #tax #blackmarket #rob-bonta, photo via Yash Lucid.



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It appears that things are getting better and better in the places whenre cannabis has been made legal.

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The high complexity of creating legal markets from illegal ones is definitely showing. It will take some years before there is a model which can easily be adopted by and adapted to other places.

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I believe Canada in 3 to 4 years will have an excellent model to go by. Being that a lot of Smoke members are Canadian I got to read and learn about the Canadian laws around cannabis. And right now they seem to me as an outisder pretty good, rewarding, strick but fair. Long live the CCLLM (Canadian Cannabis Legalization Law Model)
(Dont know if it would be called like that. I just like the sound of it)

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They should just rename the country to Cannada.

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That's what I was thinking as well 😂

Good news for traders and customers. They should look into increasing taxes on alcohol.