A new study says California would make more money from legal weed sales if it chilled out on taxing it.
The study, conducted by Reason Foundation, Good Farmers Great Neighbors, and Precision Advocacy, found that California's legal cannabis industry cannot compete against the state's illicit, underground market because of pricing. In fact, the problem has been so persistent that many legal, licensed growers are selling some of their product on the black market just to stay afloat. Some analysts even say that California's black market for weed is bigger than its legal one.
"High taxes are undermining California's legal cannabis market," Geoffrey Lawrence, director of drug policy at Reason Foundation, said in a press release. "California could double monthly cannabis tax revenues by 2024 by eliminating the cultivation tax. Without the cultivation tax, our data show lower cannabis prices would increase sales of legal products, increasing the state government's general sales tax revenue and more than replacing losses from the eliminated cultivation tax."
Ironically, California could more than double its weed tax revenue by 123% if it reduced, or even eliminated, some of its cannabis taxes, the study estimated.
Cultivation taxes charge a tax for every pot plant grown. Other legal states have cultivation taxes, too, but not as high as California's. For comparison, growing a pound of licensed weed in the Golden State results in about $1,441 in tax. In Colorado, the tax is only about $526 a pound. In Oregon, it's even lower: $340 a pound.
The study recommended not only eliminating California's cultivation tax altogether, but also suggested reducing the retail sales taxes and ending local bans on legal pot sales.
Part of the problem with low legal sales is lack of legal access. In Oregon there's one legal pot shop for every 6,145 residents. In Colorado, there's a licensed pot shop for every 13,838 residents.
Yet, in California, there's only one legal shop for every 29,292 residents, the study found.
"We are experiencing first-hand a serious price compression in the California supply-chain in part as a result of the illegal market, high taxes and fees and a patchwork of inconsistent local taxes driving legal operators to the brink of a financial cliff," said Amy O'Gorman Jenkins, president of Precision Advocacy and legislative advocate of the California Cannabis Industry Association, in a press statement. "We cannot allow the largest cannabis market in the world to fail. This study provides a roadmap of tax policy solutions for the governor and state legislative leaders to consider immediately."
We guess that's just what happens when the same group of people responsible for keeping cannabis illegal is suddenly put in charge of legalizing it. While weed is a no-brainer cash cow for businesses and governments alike, it's time to stop pretending that it hooks people like nicotine. There's absolutely no reason to tax something this heavily when it's safer than booze and tobacco.
To read the original study in full, click here.