California lawmakers are pushing for lower tax on legal cannabis in an effort to thwart the black market. Two members of the state assembly announced a bipartisan plan Thursday that would reduce taxes on legal pot. California’s fledgling cannabis industry began January 1 of this year after voters passed Prop 64 in 2016.
Assembly Member Rob Bonta, a Democrat from Oakland, and Republican Tom Lackey of Palmdale say taxes on pot are too high. They believe that the impact of taxes on the price of legal weed allows unlicensed growers and sellers to continue to thrive.
“Without tax relief to make taxes more affordable, we will continue to empower California’s mature black market,” Lackey told reporters.
Lackey is a retired 28-year veteran of the California Highway Patrol. He also noted that illicit operators don’t check identification to prevent sales to minors. They don’t pay any taxes or follow strict safety rules, either.
Taxes And Even More Taxes
Cannabis taxes in California are first assessed to cultivators. Growers pay $9.25 per ounce of flower and $2.75 for each ounce of leaves. Once products are sold at retail, even more levies are added. A state excise tax slaps another 15 percent onto the total. Local governments can add their own fees, and sales tax is tacked on for recreational pot buyers.
Retailers in California say when combined, taxes on marijuana approach 50 percent. The cost of legal weed goes up even more with the expenses of required testing and tracking thrown in, especially when specialty items like moonrocks are in the mix.
If Bonta and Lackey succeed, their plan would reduce the excise tax to 11 percent. They would also eliminate the cultivation tax for three years. The lawmakers estimate that total prices at retail would shrink about 9 percent with the proposed reductions.
Not A New Problem
Other states with legal cannabis have also struggled to find the so-called sweet spot for taxation. Activists have long included potential tax revenues as a benefit of cannabis legalization. Consequently, many lawmakers see marijuana as a cash cow for strapped public coffers.
But when taxes are too high, many buyers choose to remain outside the legal supply chain. This means that established black market operators continue to have a steady stream of willing customers.
When the State of Washington became the first state to legalize cannabis in 2012, it also imposed taxes at many stages of production. A tax of 25 percent was assessed up to three separate times on some products. It was added when growers sold to processors, and when processors sold to retail shops. Consumers got hit again when they purchased from the retailers.
Washington reduced and combined those taxes into one 37 percent levy at the retail level in 2015. Buyers also pay the usual sales tax on their purchases.
Final Hit: California Lawmakers Are Pushing For Lower Tax On Legal Cannabis
Assembly Member Bonta noted that is important to support the newly legal pot businesses now so they can compete with the black market.
“If we don’t get it right in the beginning, it will be hard to make up for it later and correct in the future,” he said.