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Lawmakers Seek Tax Cuts For Sluggish California Legal Pot Industry

OAKLAND (CBS / AP) -- A Bay Area member of the Assembly is among a group of Democratic state lawmakers seeking major tax cuts for the marijuana industry to jump-start's California's sluggish legal marketplace.

The bill Assemblyman Rob Bonta of Oakland and others introduced Monday would for the next three years eliminate the state's $148 per pound cultivation tax and reduce the state's 15 percent excise tax on retail sales to 11 percent.

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Bonta, state Treasurer Fiona Ma and three other Assembly members said at a news conference Monday that the state's year-old legal marijuana marketplace is struggling to keep up with California's entrenched black market not encumbered by state and local taxes and time-consuming and costly regulations.

State tax revenues for the legal industry's first year fell $275 million short of the $630 million Gov. Jerry Brown included in his proposed budget last year. Licensed marijuana businesses complain that California's high taxes and complicated red tape leaves them unable to compete with the state's thriving illegal market.

Bonta said the state's legal marijuana industry is "not occurring as we hoped, expected and wanted."

The proposed bill would for the next three years eliminate the state's $148 per pound cultivation tax on farmers and reduce the state's 15 percent excise tax on retail sales to 11 percent. A similar bill failed to clear the Democratic-controlled Assembly last year.

"The black market continues to undercut businesses that are complying with state regulations and doing things the right way," said Bonta in a statement. "AB 286 will temporarily reduce the tax burden on these licensed operators to keep customers at licensed businesses and help ensure the regulated market survives and thrives. This very strategy has been shown to actually increase overall tax revenue in other states."

On Jan. 1, 2018, California broadly legalized marijuana use for adults after overwhelming support for Proposition 64, which promised to fill state and local coffers while helping to eliminate the state's illegal operators. But far fewer licenses and tax revenues have been collected than expected and legal businesses point to the state and local taxes and red tape as the reasons.

California officials said the state collected $234 million in taxes between January and October last year, the latest figures California Department of Tax and Fee Administration has available. Gov. Gavin Newsom's proposed budget for the fiscal year that ends June 30 estimates $355 million in annual tax revenues, a $275 million reduction from previous estimates.

Legal marijuana businesses also pay local taxes not affected by the bill, which failed to pass last year.


© Copyright 2019 CBS Broadcasting Inc. All Rights Reserved. The Associated Press contributed to this report.

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