Taxes, taxes, taxes. It’s really what it all comes to when any new, exciting sector emerges in the government’s eyes. The cannabis industry has grown immensely since Proposition 64 in California, leading to its current legal status for recreational consumption. Unfortunately, statewide taxes are through the roof. Add on the federal taxes, plus the assortment of fees and unprecedented complications that cannabis companies face, and there’s a tiny slice of the pie left for those who’ve dedicated their lives to cannabis reform. The Golden State cannabis community is truly going through some harrowing times at the moment.
Sure, the government is seeing a pretty penny off of taxes, but this could end up backfiring on them at the end of the day. As MJBizDaily reports, a group of cannabis industry leaders issued an open letter to CA Governor Gavin Newsom and public officials detailing the dire circumstances that could lead to the “collapse” of the industry as we know it. The 29 executives and activists who signed off on the letter detailed the government’s “unwillingness” to regulate and oversee the cannabis industry properly. The letter calls out the purpose of Prop 64, specifically, saying that legalizing cannabis wasn’t simply for tax revenue but for the protection of Californians from the illicit market where products aren’t tested or regulated. Unfortunately, underground sales are thriving since they aren’t facing the same taxes as licensed businesses. “Four years after the start of legal sales, our industry is collapsing, and our global leadership and legacy are at the brink of disappearing forever,” the letter reads.
“The California cannabis system is a nationwide mockery; a public policy lesson in what not to do,” the letter continues before describing the effects that cannabis tax rates will soon have on many businesses. The letter states that the majority of licensed cannabis businesses will have to choose between having to “pay exorbitant taxes into a system designed for failure or pay employees so they can feed their families.”
Demands for change to the current laws aren’t new, though they’ve gone unheard. Plenty of players in the cannabis industry, including those who signed off on the letter, have reached their wit’s end in this battle. And it’s not just the taxes, either. Craft cannabis growers have helped turn California into the #1 destination for cannabis, yet the detriment of taxes and regulations is pushing them further out of the industry.
There have been little efforts to address the lingering effects of the War On Drugs. The letter states that the government’s promises to protect are ineffective since operators “are being assaulted, burglarized, and left without recourse or protection from law enforcement.” Meanwhile, these same operators are racking up expenses and costs “associated with a licensing regime that has no timelines and no respect.”
The executives and advocates emphasized the dangers that an unregulated market could bring. Unfortunately, 75% of cannabis consumed is from the illicit market, creating further public health and safety risks. What’s worse is that, despite Californians voting for legalization, only 32% of the state has legal access to cannabis. Consumers can easily score weed bags from unauthorized sellers before they can from a retail dispensary. Despite being legal across the state, local laws have practically placed bans on cannabis sales.
Ultimately, the letter broke down the demands into three different points:
- Eliminate the cultivation tax on marijuana in the state, which the government said would increase on Jan. 1st, 2022.
- Enforce a three-year break on excise tax.
- Expand retail sales across the state.
Cannabis industry leaders are now hoping that officials include these three requests on the State Budget, which will be made public on Jan. 10th. Additionally, they said they will be putting “every ounce of our energy to educate and convince” the remaining two-thirds of the Legislature to vote this into law by July 1st, 2022.