After two years of licensed cannabis stores selling legalized marijuana across California, the industry has encountered numerous teething problems. Crippling regulation and licensing costs, rising local and state taxes, local city usage bans, and a strong illicit market that shows little sign of waning, have all proved to hinder industry growth. At this point, it is safe to say the Golden State’s legal marijuana industry is in need of a little prod, to help it move forward.
Calling for a Return to the Ballot
With lawmakers seemingly finding it difficult to pass any changes as quickly as the cannabis industry needs them, Cody Bass has floated another idea.
The South Lake Tahoe City Council member, board member for the National Cannabis Industry Association (NCIA), and Tahoe Wellness Cooperative owner/operator, suggests adding a new initiative to the statewide ballot. Aimed at reducing taxes and regulatory costs, as well as plainly calling for cities to agree to cannabis stores operating within their neighborhoods, so long as voters supported Proposition 64, the move would help legal cannabis business owners get a little closer to competing with those selling pot illegally.
While this appears to be a heavy lift, Bass says “it’s within the realm of reality, if we are unified.”
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Similarly, in mid-December, recommendations from the Legislature’s top advisor suggested lawmakers think about overhauling cannabis tax structures, possibly moving to a potency-based tax system, aimed at reducing harmful marijuana use. As prior efforts made to encourage some local governments to permit cannabis sales and lower taxes for licensed marijuana retailers have fallen short, the Legislative Analyst’s Office even suggested lawmakers look at getting rid of cultivation tax all together.
Debate Over Raising Cannabis Retail Sales Taxes
When it was announced the state planned to raise cannabis retail sales taxes on January 1 2020, the Californian Cannabis Industry Association (CCIA) said it was both “stunned and outraged” by the announcement.
“Widening the price disparity gap between illicit and regulated products will further drive consumers to the illicit market at a time when illicit products are demonstrably putting people’s lives at risk,” the association statement read.
In response, Gov. Newsom’s office noted it is actually state law that requires such automatic tax increases, and suggested it would be “dangerous” for the Governor to simply ignore such legislative mandates.
Those Against Another Ballot
There are also supporters of Proposition 64 who say it’s premature to minimize taxes and loosen regulations intended to protect both consumers and the environment alike.
Environmental activist, Michael Sutton, for example, suggested that California dangle incentives, like sharing taxes collected from marijuana sales with local cities, to help prod cities to overturn their prior bans of cannabis retail store operations within their local neighborhoods. He also proposed making more technical assistance available to new cannabis outfits as they start up, and help satisfying the stern commercial cannabis testing and tracking mandates imposed by the state.
With 75 percent of cannabis businesses cutting staff this year to stay afloat, sales taxes generated by legal cannabis sales falling short of predictions, illegal pot shops outnumbering legal ones by three-to-one, illicit sellers undercutting legal sales on the backs of significantly lower business costs, and serious concern among law enforcement at the threat of bootleg cannabis to public safety, it’s pretty clear California’s legal marijuana industry could use a little help closing the gap on the illicit counterparts.
And if lawmakers are unable to usher in changes as quickly as an industry calls for them, while the public generally supports a legalized cannabis market, stakeholders may be left with little choice but to hit the ballots again very soon.
The Los Angeles CANNABIS LAW Group represents growers, dispensaries, ancillary companies, patients, doctors and those facing marijuana charges. Call us at 714-937-2050.
Proposition 64 – The Adult Use of Marijuana Act