January first in 2018 is the deadline for the implementation of recreational marijuana in California, where the marijuana shops will be open for business to all adults. Many counties are struggling to meet all of the deadlines and some will fail to have all the necessary rules and guidelines in place. Many counties have simply opted to ban marijuana altogether and wait and see how it pans out. However, this is a risky tactic as many marijuana businesses will establish themselves in marijuana friendly regions, and there they may stay for the decades to come.
California Getting Greedy?
Unfortunately, the state of California is putting a huge tax on the price of weed. Many believed that California was to be the land of the free in terms of marijuana legalization. And it seemed to be that way for a long time, until officials recently declared an unprecedented tax hike that is going to kill off many legitimate businesses as well as jack up the price of weed. It seems that administrators could not keep their hands away from the honey pot in order to finance their personal planning projects and various ideals. Among many other flaws in the idea that keeping taxes on businesses sky high and making marijuana as unaffordable for regular citizens as it can possibly be, this policy is going to keep the black market thriving for a long time to come. The same black market is responsible for pumping toxin laden weed into wider society which ends up causing irreparable damage and with users eventually ending up in the ward, costing even more money. Interventionism at its finest.
Between customers, retailers and growers, taxes on cannabis may reach as high as 45% in parts of the state, according to a Fitch Ratings report. Those high taxes are sure to keep users away from legal marijuana come January 1. Consumers will pay a sales tax ranging from 22.25% to 24.25%, which includes the state excise tax of 15%, and additional state andlocal sales taxes ranging from 7.25% to 9.5%. Local businesses will have to pay a tax ranging from 1% to 20% of gross receipts, or $1 to $50 per square foot of marijuana plants, according to the Fitch report. In addition, farmers will be taxed $9.25 per ounce for flower as well $2.75 per ounce for leaves.
The Fitch Rating Report states that this combination of state and local taxes for consumers, retailers and growers could keep portions of California’s cannabis industry off the grid, where it has flourished for some time. The black market is still thriving in California and users can still quite easily gain access to marijuana from local dealers. Among the eight states where recreational marijuana is legal, only Washington has a higher tax rate at about 50%.
It costs around $35 to buy a small bag of high quality medical weed in Los Angeles. In 2018, when recreational sales become legal, the price of the same bag from a vendor will be around $55. This amounts to a 70% jump in the price. Currently, growers are selling clippings to manufacturers at roughly $44 per pound. But because of the tax hikes coming in January, the taxes for selling loose leavings will far exceed what they can be sold for, meaning that these leaves have to be thrown into the garbage heap due to interventionism.
Because the tax rates vary so wildly from city to city with all of the different rules and regulations, black market dealers are no doubt popping champagne bottles at all the high tax rates. According to some estimates, Humboldt County has over 14,000 unregulated growers. This marijuana is going to flock to high tax areas where businesses are not allowed to make money. If the money was left in the hands of businesses then they could spend it on improving their product, supplying the best quality marijuana that has been lab tested. As it stands, businesses might just resort to buying directly from the black market and selling recreationally. There is a huge supply and it is far cheaper.
Not all Doom and Gloom
While many business owners may grumble at the high taxes, there is a silver lining. Many other states have restructured marijuana tax rates over time. And the price of marijuana might come down as the legal markets grow and people come to become more familiar with the market. And the benefits to state and Federal coffers, is, all things considered, the only reason why legislators are allowing marijuana into society at all. However, a 45% tax on marijuana is making the black market very competitive, and California has a huge black-market marijuana problem which needs to be addressed. To add contrast, Coloradoand Nevada both follow with rates of 36%. Oregon has a tax rate of 20% and Alaska has a rate of up to 20%.