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California can grow tax revenue by cutting this tax

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California could increase legal cannabis sales and bring in 123% more than its total monthly cannabis tax revenue by 2024 by eliminating its cannabis cultivation tax, according to California. a new study by the Reason Foundation. Nearly two-thirds of cannabis sales in California are still in the illicit market, according to the report released by the Reason Foundation, Good Farmers Great Neighbors, and Precision Advocacy.

Due to its lack of outlets and high taxes, the legal cannabis market in California has failed to meet expectations. It is only a third of the size expected based on its population and the rates of adult use found in surveys by the Administration of Substance Abuse and Mental Health Services.

“High cannabis rates are the biggest reason the legal cannabis market in California is struggling. The elimination of crop tax is how the state can begin to fix it,” says Geoffrey Lawrence, director of policy. of drugs in Reason Foundation and author of the study.

Tax up to $ 90 per ounce

“State leaders could double current monthly cannabis tax revenues by 2024 by eliminating the cultivation tax. Without the cultivation tax, our data show that lower cannabis prices would increase sales of legal products. , which would increase the general income of the state government sales tax and more than replace the losses from the eliminated cultivation tax.

California’s state and local rates on legal cannabis can be as high as $ 90 per ounce, or $ 1,441 per pound. By comparison, legal cannabis rates average $ 340 per pound in Oregon and $ 526 per pound in Colorado. Because of lower rates and greater access to legal cannabis products, residents in nearby Oregon spend 378% more per capita on legal cannabis and Colorado residents spend 335% more per capita on legal cannabis products. of legal cannabis than Californians.

“We have experienced first-hand a serious price compression in the California supply chain in part due to the illegal market, high taxes and fees and a patchwork of inconsistent local taxes that are driving legal operators to the forefront. the edge of a financial cliff. ” says Amy O’Gorman Jenkins, president of Precision Advocacy and legislative advocate for the California Cannabis Industry Association. “We cannot allow the largest cannabis market in the world to fail. This study provides a roadmap for fiscal policy solutions for the governor and state legislators to consider immediately.”

“Cannabis farmers across the state are experiencing the biggest challenges of their time. Many farmers are planning to go in May this year.

“For example, Busy Bee Organics, one of the first sun-grown farmers in Santa Barbara County, has already stated that it has not planted this year,” warns Sam Rodriguez, policy director of Good Farmers Great Neighbors, a group of cannabis companies and executives from the county of Santa Barbara. “California’s crop tax is declining and has only contributed to more and more uncertainty about the future of the state’s cannabis farming economy and whether it can survive. The immediate elimination of the tax cultivation would be a first step in the right direction to address the critical issues impacting the entire legal cannabis market of the state from seed to sale.

“The report provides a useful roadmap for cannabis tax reform in California. In the end, it projects that even with substantial tax cuts, the state can expect total revenues to increase substantially over the next two years due to growth. Substantive tax cuts therefore appear to be a feasible strategy to reduce illicit market demand while maintaining reasonable revenues for state-funded programs at Prop. 64, ”said Dale Gieringer, director of California. NORML, writes in the study’s preface.

The study also recommends reducing the sales tax, which, combined with the elimination of the cultivation tax, would help legal cannabis products to better compete with the illicit market. It also encourages state leaders to consider revenue-sharing options and other policies that could encourage California local governments to stop banning the sale of legal cannabis products in their jurisdictions.

Oregon has one legal cannabis retailer for every 6,145 residents and Colorado has one legal retailer for every 13,838 residents, while California has only one legal cannabis retailer for every 29,292 residents, the study finds. And since the vast majority of California localities have banned the sale of cannabis, more than half of the state’s legal glass stores are located in just 18 cities.

“California voters have legalized cannabis, but there are massive sections of the state, basically large cannabis deserts, where adults do not have access to legal cannabis products and have yet to return to the black market. Lawrence adds.

The full study, “The Impact of California Cannabis Rates on Legal Market Participation“is available here and here (.pdf).

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