Could California’s Insane Cannabis Tax Cripple the Legal Market?
California was the first state to legalize medical marijuana in 1996 with Proposition 215. It was a time when the wild west was full of marijuana warriors who literally laid down the law — and their lives at times. Which might help explain why California has been so resistant to full on legalization with all its taxes and regulations. Things start sounding more like Nottingham and less like Sherwood Forest when you hear the words “45 percent sales tax.”
Prop 215 was the perfect medical marijuana model thanks to one of its key authors, Dennis Peron, who changed the marijuana and LGBT landscapes of our nation. It was perfect in it’s numerous imperfections (hindsight) that allowed almost anyone to obtain a medical use card. But California is the world’s sixth largest economy and that means tourism. Also, full on legalization is looking better and better on the states that make it happen.
High sales taxes, however, are threatening to bring California cannabis back into the black market when they finally go all the way on January 1, 2018. “High effective tax rates on California cannabis may complicate the state’s efforts to establish legal markets” analysts Stephen Walsh and Karen Ribble said within a Fitch Ratings report on California’s pot taxes.
Rates will vary between municipalities with both state and local taxes added to the price. Growers, sellers and consumers all have their own sets of taxes with consumers paying 22.25 to 24.25 percent tax, though also reaching as high as an outrageous 45 percent — depending where one is in the state. The taxes include the state excise tax and additional state and local taxes.
Related Story: Is California Really Ready For Legal Marijuana?
The Fitch report believes that these higher taxes could send people back into a black market that’s never stopped flourishing. “California’s black markets for cannabis were well established long before its voters legalized cannabis in November 2016 and are expected to dominate post-legalization production,” read the Fitch report.
It’s all going to really come down to the consumer. Plenty of Californians and visitors are going to be pleased as punch to pay the extra taxes in order to just walk into a legal dispensary and pick up their cannabis supplies. However, those already prone to doing things under the radar? Well, we can predict one thing clearly, California’s legalized marketplace will be nothing if not dynamic.