Bill to suspend marijuana tax advances

When voters approved Proposition 64 in 2016 to legalize the personal use of marijuana, it almost seemed like a foregone conclusion that someday California would emerge as an economic power within the burgeoning cannabis industry.

The state, after all has been synonymous with weed since the 1960s.

Reality, however, has harshed that hopeful buzz as California’s legal pot businesses have floundered under heavy red tape while illegal operators have prospered.

In fact, illicit sales today account for an estimated 60 percent of the state’s overall marijuana market, putting legal operators at a distinct advantage and giving other states, like Michigan, an opportunity take the lead in a market that’s expected reach $76 billion nationwide by 2030.

In an attempt to turn the tide, Assemblyman Matt Haney, D-San Francisco, has authored legislation to take some of the pressure off of California’s legal cannabis operators.

AB 564 seeks to suspend an increase of the excise tax on cannabis, from 15 to 19 percent, which is scheduled to take effect on July 1.

“If we continue to pile on more taxes and fees onto our struggling small cannabis businesses, California’s cannabis culture is under serious threat of extinction,” Haney said in a press release. “Instead, we should be looking at how we can support this industry which has barely been given a chance to survive after legalization. If we want to support our cannabis industry that drives millions of visitors to California every year, adding more costs makes absolutely no sense.”

The bill is sponsored by California NORML, the United Food and Commercial Workers Western States Council, the California Cannabis Industry Association, the California Cannabis Operators Association, the United Cannabis Business Association and the Origins Council, who say that a tax increase now will just send consumers away from the regulated market to illegal operators where they can purchase marijuana at a fraction of the price.

“Nearly a decade after Californians overwhelmingly approved cannabis legalization, the industry is struggling under the crushing weight of a 15 percent excise tax,” said Caren Woodson, president of the California Cannabis Industry Association, in the press release. “Any increase, particularly a 25 percent increase, would not only be bad public policy, but devastating to operators already on the brink.”

Indeed, conditions have become so difficult in California that the number of inactive and surrendered pot licenses in the state recently surpassed the number of active ones. At the same time, the state is missing out in millions of dollars in lost revenue when consumers turn to the underground market for their high.

But while suspending the tax increase could help the cannabis industry and possibly state revenues, it would remove resources from causes that stood to benefit from the added funds, which include childcare, youth and environmental programs as well as grants to Native American tribes. That’s why dozens and dozens of organizations like Youth Forward, Child Action Inc. and Indigenous Justice oppose the bill, saying suspending the tax would break promises made to their constituents.

Even an organization like Getting it Right from the Start, which is devoted to developing “optimal cannabis policy,” opposes AB 564 on these grounds, saying a suspension would favor the cannabis industry over the needs of children.

“California’s cannabis taxes are far lower than states like Washington and fund critical services for kids, the environment, and public safety,” said Dr. Lynn Silver, a pediatrician and senior advisor at Getting it Right from the Start, in a press release. “Proposition 64 promised to invest in healthier communities. With a significant budget deficit and federal funding for children and environmental programs dwindling, now is the time to protect, not slash, these critical investments.”

AB 564 passed out of the Assembly Business and Professions Committee on a 15-0 vote (with three members not voting) on April 22. It will be heard next in the Assembly Revenue and Taxation Committee.