A proposed change in California cannabis taxes has industry experts worrying that the legal cannabis industry will fail in California.
Taxes Too High? How Strange!
An article from from Marijuana Business Daily written by John Schroyer quotes cannabis industry insiders who are worried that layoffs and store closings will skyrocket in California because of a proposed hike in California cannabis taxes. The tax increase is based on the wholesale price which in turn is calculated in some arcane manner from data that legal producers are required to provide. (Hint: that means illegal producers’ pricing is not used in the calculation, because of course that would LOWER the calculated tax.)
The effect of the proposed tax increase has store owners and growers predicting dire straits for the California industry. Amy Jenkins, from the California Cannabis Industry Association (CCIA) says “the industry is really struggling” citing layoffs and difficulty in raising capital for legal marijuana enterprises.
Excise taxes for flower will jump on January 1 from the current $9.25 per ounce to $9.65. Similar increases will apply to anything else a marijuana grower might sell. Of course, what the grower pays in taxes gets passed though the retailer to the consumer, assuming the consumer is willing to pay the price.
For the California consumer, who is paying sales tax in addition to the excise tax, just the tax on marijuana can add as much as 45% to the price. Obviously, you are going to find a better deal from your friendly unlicensed dealer, who doesn’t collect for the government.
Meanwhile, the demon weed appears to be as popular as ever with the stores and sellers who don’t pay taxes–aka the “illicit” dealers. With no taxes, no fees and minimal regulatory burden (apart from the little problem of maybe going to jail), dealers who are not licensed can grow or sell weed for significantly less than the licensed establishments.
According to one Republican legislator, if California does not reduce or eliminate marijuana taxes, it will be a “death knell” for the industry–at least for the part of the industry that gets permits and licenses. The rest of the industry, the non-taxpaying part, will likely continue to do just dandy.
So what we have here is a classic example of government shooting itself in the foot–the licensed industry wants to eliminate the unlicensed sellers but the unlicensed sellers are doing-just-fine-thank-you with the assistance of Big Brother Government’s lust for tax money and control.
And another delicious irony is that even with the legalization of marijuana in California, the amount of weed sold by unlicensed growers and retailers is double the amount sold by the legal industry and is continuing to increase.
MaryJane Asks You
What do you think? Will California learn the lessons of Prohibition or will legalization always be accompanied by unsustainably high tax rates?
Leave a comment below with your thoughts on taxes and weed and who are the losers and who are the winners.