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California Lawmaker Attempts to Combat Black Market Cannabis

California Lawmaker Attempts to Combat Black Market Cannabis
Photo Gracie Malley for Cannabis Now

Economics

California Lawmaker Attempts to Combat Black Market Cannabis

New bill aims to reduce California cannabis taxes.

California was pegged to become the best thing to happen to legal marijuana since the development of personal pot products, but that state’s recreational cannabis market, which was launched in early 2018, has struggled to do much more than prevent pot offenders from going to jail. This lackluster showing of the all-powerful cannabis industry is mostly to blame on strict regulations, high taxes and the ability for municipalities to opt out of cannabis sales altogether. There is just too much standing in the way for legal weed to flourish as it has in other states.

But Californians have not stopped getting high. There are potentially hundreds of millions of dollars still being spent on pot in the black market. In fact, before Governor Jerry Brown left office, his budget predicted that California would rake in somewhere around $1 billion from legal sales. As of the past year, the state has only pulled in about $471 million. So it stands to reason that it is losing in upwards of $630 million to illegal operations – all because Californians do not want to pay insane prices for cannabis. It’s a desperate situation that one state lawmaker is hoping to combat with legislation designed to lower the taxes on marijuana across the board.

On Monday, Assemblymember Rob Bonta of Alameda introduced a proposal (AB 286) called the Temporary Cannabis Tax Reduction bill. The goal of the measure is to briefly cut state excise taxes from 15 percent to 11 percent and put a temporary hold on cultivation taxes until 2022. In doing this, supporters say legal pot prices will fall in line with the rates of the black market, persuading the consumer to move over into legal territory. “What we have heard in the industry is that these taxes are too high,” State Treasurer Fiona Ma, who is also sponsoring the bill, told Fox 40 News.

Those behind this legislation believe is the missing link to making the California cannabis trade profitable for all.

State officials say the state could start generating between $8 and $20 billion annually, but not before giving the consumer the incentive to starting buying pot for legal channels. “The black market continues to undercut businesses that are complying with state regulations and doing things the right way,” Bonta said in a statement. “AB 286 will temporarily reduce the tax burden on these licensed operators to keep customers at licensed businesses and help ensure the regulated market survives and thrives.”

This is not the first time a measure of this kind has been introduced in California. Last year, an identical bill was brought to the table by Assemblymember Tom Lackey, but it failed to get the necessary support after to go the distance.

It is still too early to tell whether the Temporary Cannabis Tax Reduction bill will find the support to become law. Even if it does, putting a temporary halt on taxes may only serve to fix part of the problem. There is still a licensing issue underway, one that has resulted in fewer dispensaries than ordinally projected.

The state must also figure out how to contend with the most of its cities bowing out of the legal cannabis market. As it stands, only around 20 percent of the local governments allow marijuana sales. The rest, well, it isn’t happening. This has created a bizarre prohibition-esque turf in which it is easy to buy weed only in certain parts of the state and not others. For example, in Los Angeles County, a cannabis consumer will have no trouble finding a cannabis store in Hollywood, but those people living in other areas  are out of luck. Up until recently marijuana delivery wasn’t even allowed in those areas. Fortunately, California’s Bureau of Cannabis Control recently clarified a rule that gives home delivery operations the right to service “any jurisdiction within the state.”

Still, it is important to understand that Assemblymember Bonta’s plan is not to make any permanent changes. The original tax system would be reinstated once the legal marketplace gains traction. Of course, the potential exists for retail pot sales to crawl back into the crapper at that point.

Some cannabis advocates believe more needs to be done to get California’s pot market on track – like going back to the drawing board.

“The cannabis industry is being choked by California’s penchant for over-regulation,” Dale Gieringer, director of California NORML, told the Los Angeles Times. “It’s impossible to solve all of the problems without a drastic rewrite of the law, which is not in the cards for the foreseeable future.”

TELL US, do you think California cannabis taxes are too high?

1 Comment

1 Comment

  1. John Kittredge

    January 30, 2019 at 4:06 am

    Obviously…gouging consumers is not the right way to establish a legal base industry. Take a lesson from how the transition out of prohibition was handled. It was cheap for suppliers and businesses to come out of the shadows and operate. Licensing and taxes were reasonable. They gave it a chance to grow before raising taxes.

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