High taxes could drive up marijuana prices and bolster the black market in California, analysis says

By November 1, 2017 Recent News

Washington Post 30 October 2017
Family First Comment: They argue that legalisation of dope will get rid of the gangs and the black market.
Think again!
Taxes raise the price. Drug users want it cheap.

High taxes on legal marijuana in California could have the potential to turn many consumers away from the state’s cannabis shops and toward the black market, according to a report from Fitch Ratings.

The credit rating agency estimates state and local taxes on marijuana, which will become legal in California on Jan. 1., could be as high as 45 percent in some cases. It would trail only Washington state, which levies a 50 percent tax on marijuana.

“The existing black market for cannabis may prove a formidable competitor to legal markets if new taxes lead to higher prices than available from illicit sources,” the report says.

Recreational marijuana will be taxed on both the state and local level, contributing to the potential for high rates. California will impose a 15 percent excise tax, as well as cultivation taxes. Municipalities will also levy sales tax and a business tax, which could be anywhere from 1 to 20 percent, on gross receipts. Business taxes on recreational marijuana have been approved by voters in 61 California cities and counties, according to the report.

These high tax rates have the potential to drive customers toward the black market. The state is the nation’s epicenter of marijuana growing and has long provided black market pot. The report states that Colorado, Oregon and Washington all reduced tax rates after the commencement of legalization to shift customers back toward the legal market.

California will implement a statewide framework for marijuana legalization, but each municipality must decide whether it wants to house marijuana businesses and, if so, map out its own regulations and tax structure. This may lead to a playing field that is not level in terms of tax revenue. Some cities like Adelanto, about 85 miles northeast of Los Angeles, are using the cultivation of marijuana as an economic development strategy. In Monterey County in northern California, the local government is encouraging cannabis growers to use its vacant greenhouses.
READ MORE: https://www.washingtonpost.com/news/post-nation/wp/2017/10/30/high-taxes-could-drive-up-marijuana-prices-and-bolster-the-black-market-in-california-analysis-says/?utm_term=.7c62eaf7cf5a