Marty's Travels

My house has wheels

California pot laws

There’s an outcry about the CA laws and rules relating to taxes. Somehow, the tax rates are being blamed for the failures of the CA system. The CA tax rate for cannabis is 15%, down near the bottom of the legal states. Advocates want to reduce the taxes, an aspiration that requires 2/3 majority vote by either the Assembly or the population. That’s hard.

CA does have a rather unusual tax on cultivators based on weight. Most places charge a sales tax at the point of sale to the customer. If someone buys a $10 1-gram joint in a state with a 20% tax, the customer pays $12. If the price of cannabis drops, the customer could buy a $5 joint, and pay $6. The state loses $1 of revenue because the price of weed dropped. That’s a fundamental problem of sales taxes. When weed goes down even more, to $1 a gram, the state only gets 20 cents, a big difference from the $2 it used to get. State revenues depend on the prices of goods.

So CA charges the growers a tax based on weight, which provides a floor for cannabis revenues no matter what happens in the retail world. No matter if joints sell for $10, $5, or a single dollar, the gram is taxed at $.34 anyway (at current rates in CA). That adds about a dollar to the price of an eighth (3.5 grams), but isn’t visible to the customer because it’s in the cost of the marijuana itself before it even gets to the retailer.

To me, if there’s a problem with high prices in CA, eliminating the cultivator tax would help to the tune of $1 an eighth. I doubt that will appease the crowd, and it still requires the 2/3 majority vote. That’s hard.