California’s regulated cannabis industry has struggled for years with four major issues: excessive taxation, excessive regulation, underground competition that neither pays taxes nor follows state rules, and a federal ban that prevents interstate commerce.
At least one of those issues is finally being addressed — at least for now. Gov. Gavin Newsom recently signed a budget bill advanced by Democratic state lawmakers that temporarily reduces and consolidates various marijuana-specific taxes.
People who operate in the market are working with state regulators to reduce some of the more onerous burdens they have placed on the industry. Individual jurisdictions should allow more licensed dealers to compete with the underground market, but most have taken the pro-illegal policy of banning legal sales. And the federal government? Well, good luck with that.
Three-year tax cut to stabilize the market
Specifically, the new California legislation eliminates the cultivation tax on licensed growers and limits any further increases in the excise tax for three years, among other changes. Dale Gieringer, director of California’s NORML, said, “The budget bill is a useful start, but there is much more to be done to make legal cannabis more easily accessible to consumers who now rely on the market not regulated”.
California NORML contributed to this report.
Recent research has shown that this move is essential to the long-term health of the industry. According to an economic analysis published this spring by The Reason Foundation, regulatory costs, high taxes and municipal bans on cannabis sellers have significantly inhibited the growth of the licensed marijuana market in California.
The analysis estimated that California would impose an effective tax rate of as much as $92 per ounce. This amount is higher than the tax burden imposed on sales cannabis transactions in other states.
Gieringer, who authored the advance study, recommended at the time that lawmakers impose “substantial tax cuts” to “reduce the demand of the illicit market, while maintaining reasonable revenues” for dealers licensed by the state.
For more information, contact California NORML.