LOS ANGELES — Deep in Gov. Gavin Newsom’s new budget is a figure that says a lot about California’s shaky legal marijuana market: The state is expecting a lot less cash from cannabis taxes.
The Democrat’s proposed spending plan, released Thursday, projects the state will bank $355 million in marijuana excise taxes by the end of June. That’s roughly half of what was once expected after broad legal sales kicked off last year.
Industry experts say the diminished tax income reflects a sombre reality: Most consumers are continuing to purchase pot in the illegal marketplace, where they avoid taxes that can near 50 per cent in some communities.
Tax collections are expected to gradually increase over time, but predicting what that amount will be remains something of a guess.
Tax collections for “a newly created market are subject to significant uncertainty,” the budget said.
Josh Drayton of the California Cannabis Industry Association credited Newsom with taking “a realistic look at the challenges” after a bumpy first year of broad legal sales.
Newsom also recommended a sharp increase in spending for regulatory programs, although it’s an open question whether it will be enough to help steady the state pot economy. The budget recommends just over $200 million for marijuana-related activities in the fiscal year that starts July 1, which would be over a 50 per cent boost from the current year.
Initially “the state was too optimistic about how the implementation of legalization was going to work. This governor has paid attention to that,” Drayton said.
That said, Drayton added that legal businesses need a break from hefty tax rates that are driving consumers to the illicit economy. Various proposals have been made to cut state pot taxes.
State taxes include a 15 per cent levy on purchases of all cannabis and cannabis products, including medical pot. Local governments are free to slap on taxes on sales and growing too, which has created a confusing patchwork of tax rates around the state.
To Read The Rest Of This Article By Michael R. Blood on TheGrowthOp
Published: January 11, 2019
Founder & Interim Editor of L.A. Cannabis News