With New Marijuana Market, California Gets A Lesson In Taxes And Economic Movement

The notion of whether government should allow the sale of a mind altering drug is a different argument, especially as government regulates the sale of alcohol. Then there’s the one of it being illegal under federal law. Regardless of that stuff, the government of California finds itself in a sticky situation, something the LA Times Editorial Board covers more as an article than an opinion piece

California’s pot shops have been only open a year. They’re already lobbying for a tax cut

More than two years after California voters passed Proposition 64 to legalize marijuana, the state’s attempt to create an orderly, regulated marijuana marketplace is still a work in progress.

There are far fewer licensed cannabis businesses than had been expected and tax revenue — which officials had estimated could reach $1 billion — is trickling in at a fraction of what was anticipated. The black market for marijuana is still thriving.

Now, several lawmakers and State Treasurer Fiona Ma have introduced Assembly Bill 286, which would temporarily slash cannabis taxes in an effort to entice illegal marijuana businesses to enter the legal market. Industry groups have been lobbying for this break, arguing that lowering taxes would also bring down the price of regulated marijuana, helping legitimate operators to compete with black market dealers.

“We are helping legal cannabis businesses with their transition into the marketplace, just like we would for any startup industry,” Ma said in a statement.

Who would have thought a black market would have been “created”? It was always there, it’s just a bit more mainstream now. Lowering taxes won’t bring the vast majority of them into the legal fold, not when their choice is to pay zero taxes. But, those same high taxes are currently keeping many out of the business. Surprise? (personally, I’d open a bakery near a marijuana store).

Further, if the taxes are high, the price of the product is high, because those taxes get passed on. Surprise?

Cannabis industry groups argue that businesses can’t wait. Legitimate operators, they say, invested enormous amounts of money to get licensed and to comply with the state’s complex regulations, but they’re being undercut by illegal pot shops and delivery businesses. That’s a real problem. The state needs much more aggressive enforcement to shut down illicit operators.

Um, the entire thing is illicit, per federal law. Regardless, again, when the government has such a heavy hand on taxes and regulations you’ll see things like “illicit operators” occur.

But high taxes aren’t the only reason the black market persists. Proposition 64 allowed localities to ban cannabis businesses and many have done so. Fewer than 20% of California cities allow retail shops to sell marijuana for recreational use. No matter if a pot business has been operating for years in the gray market that existed prior to regulations, the business can’t become a legitimate, taxpaying entity without local approval. Even in the cities that do allow marijuana businesses, many are still struggling to license in a timely fashion.

The LATEB seems upset that cities are blocking the industry. They stop short of demanding that these cities be forced to allow marijuana dispensaries, though they come close.

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5 Responses to “With New Marijuana Market, California Gets A Lesson In Taxes And Economic Movement”

  1. JGlanton says:

    I watched a documentary on California growers. Now the growing cannabis is legal, it costs about $100,000 to get the long list of permits and certifications to be allowed to grow. State, county, water, environmental compliance, etc. Many of them can’t afford it because they are basically small subsistence farmers who get their income at the end of the growing season. and the county cops are raiding them harder than ever now that they have tax compliance behind it. The enforcement has become sophisticated, with every property now in a computer system and compliance schedule, with aerial surveillance photography overlaid onto county property maps. People who have been farming all their lives are abandoning their farms and moving away. A lot of grumbling about how only large “corporate” farmers will be able to compete.

  2. Jacob Noire says:

    Teach: (personally, I’d open a bakery near a marijuana store)

    That is actually funny. Are you sure you’re a conservative?

    Anyway, who would have thought a government program, even in CA, would be configured to reward the wealthy?

    • david7134 says:

      Jeff,
      I point out the fact that liberals are the ones that have restricted our ready access to drugs. That occurred during Wilson’s time. I feel that elimination of restrictions and allowing us the freedom to obtain what we desire would be welcomed by conservatives, but liberals would still desire the control that they would fight the notion. Many countries allow their citizens to manage their medical care with no restrictions. This would also greatly reduce medical cost and intrusion by the government in our affairs. If course this would significantly reduce the need for socialized medicine, which never works.

    • formwiz says:

      No such thing as a poor white Liberal.

      Even when Cordelia has the truth in font of her, she can’t see it.

  3. Professor hale says:

    I cared about this when it was a moral issue. Now that it’s just a revenue issue, I don’t have a dog in that fight. Government has a long history of restricting profitable businesses so that their friends who own those businesses can profit. The friends then show their appreciation by paying campaign bribes. It’s why some states still have state controlled distribution stores and some cities sell taxi “medallions”.

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