California’s legal marijuana industry has been a bust, falling far short of the sales projected when voters legalized it in 2016.
With the approval of Proposition 64 in 2016, Californians made clear that they wanted to end the farce of criminalizing marijuana-related offenses, and they wanted to allow a legal market for recreational marijuana to operate. Unfortunately, high taxes, a slow-moving permitting process and local government resistance has stifled the ability of the legal market to better get off the ground.
Estimates from Arcview Market Research and BDS Analytics suggest that black market sales of marijuana continue to make up the vast majority of marijuana sales in the state. Surveys of consumers have suggested that one factor keeping marijuana consumers away is the high rate of taxes.
Further, according to the United Cannabis Business Association, there are nearly three times as many unlicensed marijuana dispensaries and delivery services as there are licensed ones.
This reflects both the high demand for marijuana products and a clear mismatch for the government’s ability to entice more operators into joining the fully legal market.
While there are certainly many areas on the taxation and regulatory side to better facilitate participation in the legal market, one easy one is a bipartisan legislative effort from Assemblymen Rob Bonta and Tom Lackey to temporarily lower taxes on the legal industry in an effort to better enable it to succeed.
The proposal, Assembly Bill 1948, has been offered before, but Bonta and Lackey, with backing from state Treasurer Fiona Ma, are giving it another go.
“We must lower and simplify the taxes on cannabis if the regulated cannabis industry in California is to survive, let alone thrive,” said Bonta.
He’s right. Who knew that high and complicated taxes made it hard for businesses to thrive in California?
Currently, the state taxes marijuana twice: The cultivation tax is based on the weight of the harvested cannabis and ranges from $1.35 per ounce of fresh plant to $9.65 per ounce of dried flowers. The excise tax of 15% is applied to retail sales.
In addition, local governments have tried to profit off legal pot by imposing their own taxes, which work out to an average 14% of retail sales, according to the state Legislative Analyst’s Office.
By keeping the status quo, the state is holding back the potential of those willing to abide by the law and participate in the legal market. AB 1948 would temporarily, until July 1, 2023, reduce the state excise tax to 11% and eliminate the cultivation tax.
We hope the Legislature approves AB1948 to give the legal market a better chance at being successful.
FROM AN EDITORIAL IN THE SAN JOSE MERCURY NEWS