Statewide tax cuts following measures taken to reduce retail taxes on cannabis sales, which some cities struggle with.
The California Legislative Committee is scheduled to discuss the bill on April 22nd. It plans to cut state taxes on the legal cannabis industry after cutting some cities that have cut local taxes on the industry to help retailers survive.
Taxes as much as 45% in some parts of California can suffocate the state’s legal cannabis industry for young children before it develops, allowing states like Colorado and Michigan to overtake states with low taxes, according to state legislator Matt Haney, author of the San Francisco bill.
Haney introduced a law in March that “protects the legal cannabis industry from the threat of the tax-free, illegal cannabis market.”
California plans to raise its excise tax rate from 15% to 19%, with a nearly 25% increase in taxes in July.
If passed, Haney’s law will suspend the increase and keep the state’s tax rate at 15%.
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The bill also enacts Medicinal and Adult Cannabis Regulation and Safety Acts designed to provide a comprehensive regulatory framework for the legal cultivation, distribution, transportation, storage, manufacturing, processing and sale of cannabis within the state.
California was the first state to legalize medical cannabis through a compassionate use approved by voters in 1996. Colorado was the first state to legalize drugs for recreational use in 2014.
Golden State legalized the recreational use of marijuana for adults over 21 years old in 2019 after voters passed adult use of the marijuana law. The use of marijuana remains illegal at the federal level.
Since the industry was legalized, cannabis retailers and growers in California have struggled to compete with the growing black market. Many of them say heavy regulatory burdens, paperwork, complex and different local ordinances, and state taxes are liable.
“In nearly a decade since Californians overwhelmingly approved the legalization of cannabis, the industry is struggling with a 15% excise tax crushed weight,” said Karen Woodson, president of the California Cannabis Industry Association. “The increase, especially the 25% increase, is not only devastating for public policy, but operators who are already on the brink.”
People line up at Medmen, one of two Los Angeles area pot shops in West Hollywood, California, on January 2, 2018, that began selling recreational marijuana under the new California law. David McNew/Getty Images
At the statewide level, Haney’s law faces strong opposition from a coalition of 98 organizations, including youth forwards, right from the start, child action, and other nonprofits.
The group says it risks losing at least $150 million a year in childcare, youth and environmental programs.
“This leads to thousands of childcare slots for low-income children, fewer youths who benefit from the substance abuse prevention program, environmental degradation in the basin, and other harm,” the organization told the state, according to legislative analysis.
Indigenous Justice, a nonprofit organization that serves tribal communities, also opposed the bill.
“Abolishing the increase in excise tax would undermine these commitments and strip critical funding from tribal-focused grants that support cultural revitalization, land restoration, substance use prevention for young people, access to sacred sites, and leadership development for tribal youth,” Indigenous Justice wrote about the legislation, according to legislative analysis.
The nation distributes funds to youth services, the environment and law enforcement agencies. The analyst’s office estimates that $103 million will be sent to the Department of Human Services’ Childcare Program, $12 million will be funded to the Department of Public Health, $54 million will be sent to the Department of Healthcare Services, and $13 million will be paid to the Natural Resources Agency Program.
Estimates show that the state’s Fish and Wildlife Department is expected to receive $57 million, the Parks and Recreation Department can receive $38 million, the California Highway Patrol will receive about $50 million, and the state and community modifications will receive $44 million.
On August 6th, 2019, a marijuana greenhouse across the street from Rincon High School in a small seaside community in Carpinteria near Santa Barbara, California. David McNew/AFP via Getty Images
Meanwhile, Southern California’s desert cities are a booming industry, taking issues into their own hands.
Desert Hot Springs, a cannabis production hub just 10 miles from Resort Town Palm Springs, approved on April 15th to reduce marijuana retail tax from 10% to 5%.
The tax cuts coincided with similar behaviors carried out by Palm Desert and the desert cities nearby Cathedral City.
The city council will vote unanimously to pass the ordinance on the first reading, and consider adopting it fully after the second reading on May 6th.
