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California Marijuana Tax Cuts Eyed As Revenues Fall Far Short

(KPIX 5) -- California lawmakers are looking to reduce state marijuana taxes in an effort to get more producers and consumers to leave the black market.

East Bay Assemblyman Rob Bonta (D-Oakland) is working with State Treasurer Fiona Ma to pass AB 286, a bill to reduce the state marijuana sales tax from 15 percent to 11 percent.

Back on January 1, 2018, the first day that recreational pot was legal Oakland Harborside dispensary CEO Steve D'Angelo said that the state's taxes are too high. "It's going to mean that a significant number of people, less affluent consumers are going to turn to the lower prices of the underground market," he told KPIX 5.

One year later, that appears to be what is happening.  When voters agreed to legalize recreational marijuana in 2016 the ballot measure projected, "Additional tax revenues ranging from high hundreds of millions of dollars to over $1 billion annually." But the reality has been far less lucrative. Last year's state budget estimated $185 million dollars in marijuana sales taxes. The total brought in was $100 million dollars less than the estimate.

"There's too many businesses operating in the illicit marketplace," said Bonta. He believes that lowering the tax rate will incentivize growers and consumers to buy in the legal market.

"If you have one entity paying 15 percent tax, you'll get a lot less money than if you have ten entities paying 11 percent tax."

He says slashing the sales tax to 11 percent for three years is the carrot, but there's also a stick: more money in this year's budget for law enforcement to crack down on ilegal pot sales. "It's not okay to just say 'hey, I wanna be in the illicit marketplace,'" said Bonta. "No, there's going to be consequences."

Of course, the 15 percent sales tax is only part of the equation. There's also a six percent regular state sales tax and any city or county taxes that can increase the price and keep people in the black market. Bonta says the local governments will likely race to the bottom in taxes to keep businesses in town.




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