What happens when you over-tax something, then over-tax it even more?
California boosts pot taxes, shocking unsteady industry
California is increasing business tax rates on legal marijuana, a move that stunned struggling companies that have been pleading with the state to do just the opposite.
Hefty marijuana taxes that can approach 50 percent in some communities have been blamed for pushing shoppers into California’s tax-free illegal market, which is thriving. Industry analysts estimate that $3 are spent in the illegal market for every $1 in the legal one.
The California Cannabis Industry Association said in a statement that its members are “stunned and outraged.â€
The group said the higher taxes that will take effect Jan. 1 will make it even worse for a legal industry struggling under the weight of heavy regulation and fees, local bans on pot sales and growing and a booming underground marketplace.
“Widening the price … gap between illicit and regulated products will further drive consumers to the illicit market at a time when illicit products are demonstrably putting people’s lives at risk,†the group said, referring to the national vaping health crisis.
California made marijuana legal despite it being illegal federally, then essentially pushed people into the same illegal market that had existed, and surely that same illegal market expanded after possession was legalized. Companies cannot compete with the illegal market due to the taxes, so, let’s raise those taxes more!
Separately, cultivation tax rates are being increased by inflation, as required by law. For example, the tax on an ounce of dry buds will climb to $9.65 from $9.25, an increase of just over 4 percent.
Which will be further passed on to the consumer. Why not just grow it yourself, or buy from the person who doesn’t have a store and doesn’t pay taxes on it?
Josh Drayton of the cannabis association predicted that an eighth-ounce purchase of marijuana buds, typically priced around $40 to $45, would be pushed up to $50 or more in the new year.
I haven’t bought any in well over 20 years, I just suddenly found smoking pot to be rather boring, but, if memory serves, isn’t that a heck of a lot of money? I thought we used to by an eighth for about $10-$15 for the good stuff. Maybe I’m off on size, been a while. One article says that buying it illegally will save you 27%. Regardless, this will drive more into the illegal market. Heck, Colorado has much lower legal prices, and it is still thought that 60% of purchases were illegal.
