CA Lawmakers Focused Solely on Cannabis Taxes Cannot See the Forest for the Trees
A determined group of five California State Assemblymen from both parties have proposed new legislation that would cut the state’s excise tax on legal sales of cannabis from 15% down to 11% and would temporarily eliminate the $148/pound cultivation tax that is currently being assessed. We say temporarily because these proposed measures would expire in three years.
Staring down the barrel of embarrassingly low expected revenues at the end of the fiscal year in June 2019, lawmakers were waiting for an estimated $630 million in cannabis tax revenue but instead will be lucky to pull in just over half of that. The latest prediction is that it will tip the scale at around $355 mill.
Not bad, but not good enough.
Of course, we have no idea how much weed and money really changed hands in the past year in Cali. The government and regulatory agencies and struggling legal operators are quick to cast blame at the black market which by all clandestine reports appears to be thriving, and they are not wrong to do so.
The question should be: Why would anyone choose to buy weed on the streets if it’s allegedly so easy to obtain it legally now?
Taxes are definitely an issue.
$75 eighths of midgrade cannabis flower – albeit in fancy jars with sweet logos and stuff – are not an uncommon sight on the shelves of most legal dispensaries and a large part of that end cost is the stacking of taxation that occurs from seed to sale in this industry.
If a custy can save 40% by sending a text and meeting a dude in a Walmart parking lot for a Ziploc full of dank, well, custy gonna do what custy gotta do.
But the taxation is a double edged blade.
As money changes hands at all stops of the supply chain, a chunk here and a chunk there are supposed to be set aside to satisfy the government’s sticky palms.
The purpose, we are told, for these funds to be collected by the state government is so that they can turn around and use the money to enforce regulations on the industry that is funding them.
“Enforce regulations” means people getting busted, people losing their business, or worse their freedom and ending up in jail over a damned plant! They told us this in Prop 64 and some of you still voted for it!!!
Incoming CA Governor Gavin Newsom has already pledged to spend an additional $2,000,000 this year specifically on hunting down and popping cannabis tax evasion. Many, many otherwise honest and above board cannabis companies are going to get tangled in the web of tax compliance and the consequences will be dire.
So the draconian taxation policy currently in place in the California cannabis industry is a threat to the producer side and the consumer side.
It also highlights another major problem with the California market.
I don’t care if you slash taxes to 0% on boof weed like Canndescent or these other overpackaged midzotics, we ain’t buyin’ ‘em!
Whether it be the incredibly high cost/barrier of entry into the legal industry, or the heel-dragging by the regulators to implement reasonable guidelines, or now the risk of losing it all simply because the taxman found a bad scribble in your books, many of the most popular brands that laid the foundation for this market have simply chosen not to participate in the “legal” version of it.
If the shelves at the legal dispensary are filled with these ad-agency-derived brand names pushing booboo buds in unsustainable packaging, but your homeboy you’ve known since high school has the plug for the 20x Cup winner for a fraction of the price, the choice is too easy.
So, yes, please do continue to cut taxes, gentlemen.
But if you really want to mitigate the competition from the black market, the best thing you can do is to make it easier for people to step out of it and into the legal market and a realistic opportunity to feed their families on the right side of the law.