Marijuana users can’t keep up with high taxes

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Marijuana, the plant with a hundred nicknames, is experiencing a rocky legalization effort in California with profit falling short of expectations thanks to a complicated mix of regulations, taxes and other factors.

The problems are not caused by any lack of demand for the product. 

“Americans have a prodigious appetite for cannabis,” said John Kagia with New Frontier Data, a cannabis research firm, in USA Today. “This is definitely not an issue of constrained demand or demand falling short.” 

The problem: too many people find it difficult to find a dispensary, and the dispensaries that do exist are over-taxed and over-regulated.

Dispensaries must deal with a 15 percent excise tax, a 7.5 percent state tax, plus any local taxes. Unlike Colorado, where business is booming, California also places a “cultivation fee” of $9.25 per dried ounce on growers.

All of these costs are passed on to the consumer and make the cannabis in your local dispensary too expensive for many potential customers and contributes to a thriving black market.

“It’s not that hard to find your own dealer,” said Daniel Green, a cannabis connoisseur in Lodi. I’ve been to dispensaries, but everyone I know prefers dealers because dispensaries are too expensive.”

Even long before legalization, marijuana had a long and complicated history in the state.

The article Marijuana Mavericks: The History of Marijuana in California on MarijuanaBreaks.com, a marijuana information and resource website, traces the history of weed in the Golden State. 

Cannabis plants (mainly in the form of hemp) were grown for rope and fiber in Mission San Jose back in 1795. More and more farms added it to their crops over time and by 1810 the state produced more than 220,000 pounds of it.

The ensuing years saw a Mexican rebellion against the Spanish, a cut in the subsidies for cannabis farmers, and finally, a general abandonment of the crop.

By 1913 marijuana became available by prescription only, along with opium, morphine, and cocaine. 

Anti-marijuana hysteria began to flourish around the country, leading to cautionary tales in the form of films like “Reefer Madness,” which were produced to warn others about the “evils” of marijuana.

That still didn’t stop people from smoking weed privately; by 1932, 60 percent of all narcotics arrests in California involved marijuana.

The 1960s saw a public resurgence in open smoking of weed when the grass-loving hippies hooked up with the pot-loving beatniks and collectively gave birth to the “legalize marijuana” (LEMAR) movement in the 1970s.

LEMAR came of age in 1996, when it helped California become the first state to legalize cannabis for medicinal use.

LEMAR celebrated middle age by passing a state law legalizing recreational use in 2018 — six years after Colorado.

There was much rejoicing when recreational cannabis became legal in California, but the agony of bureaucratic red tape has stubbed out some of the joy since then.

The state of California raised $74.2 million in excise taxes in the second quarter of 2019. 

While that was higher than the previous quarter, the amount falls far short of projections. Meanwhile, cannabis markets in Colorado, Washington and Oregon have thrived since legalization of cannabis, California has seen the second-least amount of revenue.  

In May, California Governor Gavin Newsom’s budget lowered the expectations for the tax income from $355 million to $288 million in 2019, and from $514 million to $359 million in 2020. 

“It is, I think, a pragmatic confession that the state still has a lot of work ahead,” said Kagia.