Cannabis Taxes Could Surpass 45% In Some Parts Of California

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Republished with permission from Weed News; Read the original article HERE.

One of the biggest arguments in favor of legalizing marijuana is that legal cannabis sales will generate tax revenues. New Frontier Data estimates that taxes from legal cannabis sales in America will top 655 million dollars in 2017 alone. Colorado itself is going to surpass 200 million dollars in revenues from cannabis taxes and fees. Revenue generation for public coffers is definitely an advantage of legalization, but if the legal industry is to truly compete with the unregulated market in a meaningful way, taxes need to be kept in check.

Unfortunately some lawmakers look at cannabis legalization as an opportunity to tax marijuana to death. Whether or not that is a strategy to hinder the success of legalization or not is anyone’s guess, but regardless, the end result of over-taxation of cannabis sales is the continued success of the unregulated market. That should be avoided as much as possible. Unregulated sales are going to exist no matter what, but a fair tax rate on legal cannabis sales (and fair regulation standards) will help ensure that the unregulated market is hit as hard as possible. A report is out from California which estimates that the tax rate on legal cannabis sales could be through the roof, which would be very unfortunate. Per the Los Angeles Times:

State and local taxes on marijuana could surpass 45% in some parts of California, jeopardizing efforts to bring all growers and sellers into a state-licensed market in January, according to the global credit ratings firm Fitch Ratings.

“High tax rates raise prices in legal markets, reinforcing the price advantage of black markets,” the firm said in a report Monday. “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.”

What is a fair tax rate for legal cannabis sales? Some will likely argue that adult-use cannabis should not be taxed at all, which is a noble stance, but one that is not based in political and economic reality. I feel that Oregon’s 20% tax rate (17% state, 3% local) for adult-use sales is fair, especially since it allows dispensaries to leave medical cannabis un-taxed. As a consumer I would prefer that the rate was lower, but as a public policy major I recognize that the tax rate (and government revenues it generates) is a big reason why a legal, regulated industry has such a strong level of support among Oregonians. What do Weed News readers think? How much is too much when it comes to cannabis taxes?


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