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Bill Would Slash California Cannabis Taxes to Compete with Black Market

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Legal cannabis prices in California are far too high, which is why Assemblymember Rob Bonta announced a bill on Jan. 28 to slash cannabis excise tax from 15 percent to 11 percent and completely scrap the cultivation tax for the next three years. It would lift a burden felt by business operators and consumers.

Cannabis consumers in California pay as much as 45 percent in total taxes—which many consider to be ridiculous. Because of the unreasonable taxes, many consumers just resort to shopping at illegal dispensaries and delivery services that don’t charge tax. Assembly Bill 286 would be the first step towards eliminating California’s powerful black market.

“What we have heard in the industry is that these taxes are too high,” State Treasurer Fiona Ma told Fox40. “We don’t tax other startup businesses when they start. We really want them to get off the ground and hopefully be successful and then, maybe later we can assess taxes. But this is the only industry where we are assessing high taxes at the front end, which is not a guarantee for success here.” In the past, Ma lobbied for a state-chartered bank that would cater to cannabis businesses and relieve the current cash crisis. But that bill was defeated in an appropriations committee meeting.

The so-called tax holiday could boost sales of legal cannabis, making the legal market more realistic. By eliminated the $149-per-pound cultivation tax for three years, it would ease the difficult reality for legal dispensary operators.

In Washington state, Oregon and Colorado, initial recreational sales were slow until lawmakers revised their tax plans. According to Assemblymember Reginald Jones-Sawyer, while there are 170 licensed cannabis businesses in Los Angeles, there are 1,700—or 10 times as many illegal businesses that continue to thrive, due in part to high and unreasonable taxes.

 

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