California may lower marijuana taxes

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Lawmakers hope lower taxes will boost the marijuana industry

On January 1 of last year, California fully embraced marijuana, opening the doors to legalized recreational marijuana. Expecting a windfall of tax revenue, the industry has been somewhat of a letdown, with less revenue produced in 2018 than was produced with only a medical marijuana industry a year prior. Now, lawmakers are hoping to boost tax revenue and a few have put together a bill that would reduce, temporarily, the tax burden faced by marijuana companies.

The idea is that, by lowering the taxes, more companies will ditch black market marijuana sales in favor of legalized sales. The costs associated with establishing a business, they argue, are an obstacle for many who choose to sell their products illegally in order to not pay the exorbitant taxes.

If the plan works, the state tax of 15% paid by retail customers would be reduced to 11%. It would also eliminate completely the $148 per pound tax that marijuana farmers currently pay. The tax break would be in effect for just three years.

In 2017, California’s medical marijuana industry took in around $3 billion. This fell to $2.5 billion last year – after recreational sales were legalized.

According to the CEO of Bloom Farms, Michael Ray, “Excessive taxation hurts legal businesses and consumers while spurring the illegal market. Lowering taxes is a step in the right direction towards growth in the legal market here in California.”

A similar measure failed last year, but that was when the outlook for tax revenue was brighter. Given the current state of affairs, and a new state treasurer that supports the measure, it’s possible that the bill will find more support in the current session.