With Cannabis sales now legal in the State of California, we as recreational consumers are experiencing the green rush, first hand. Legal pot is now hot on the market in California, with increasing demand, and the Golden State is left to regulate and command a tax rate of 15% for all Cannabis products sold. That is 15% on top of city and county local taxes. Vending a premium product, monitoring of the cultivation process, and with “seed to sale” quality assurance is now enforced.
With new Cannabis business and licensing fees; it is time for us as consumers to fork the bill of such a luxury. Yes, I said luxury. Cannabis is no longer a dangerous topic to discuss, or puff! No matter the method of consumption extra efforts to protect the product, production centers, methods of transporting, and most importantly people’s health, all come at a cost.
The 15% extra tax for Cannabis should fit the bill, at least for California’s sake, and let’s hope the only excess surplus of anything collected is the keef on the bottom of a multi-chambered flower grinder. California has always been a state of relatively high taxation, especially on consumer goods. Being a high revenue state, to begin with, should ease the process of additional taxes, right? Let us examine.
The State of California requires a state sales tax rate of 7.25% but we as consumers are also subject to local economies as well. Now the extra tax topping varies depending on district tax rates and possible excise taxes locally enforced.
With just sales tax, the State of California charges it’s citizens at a rate of 6.00%, with an additional 1.25% local tax, which in some cases stems from the given City and County tax regulations. Alameda County is home to cities such as Union City, Hayward, San Leandro, and Albany, all of which are taxed at a whopping rate of 9.75%. Another example is the City of Salinas, where tax rates can jack up the price total for any customer. Salinas consumers get taxed by the State (6.00%), Monterey County (0.25%), and the City of Salinas itself at a rate of 1.5%, and a “special” undefined tax of 1.5%. Making the sales tax of anything purchased in Salinas a whopping 9.25%.
Consumers in the City of San Jose also experience their own monetary pain when it comes to taxation on sales, matching Salinas at a rate of 9.25%, and also maintaining a “special” tax of 2.75%. So, what are these “special” tax rates? Why are they enforced? Where does this “special” money go? Local School districts, Infrastructure, let us hope. Any extra taxes are not an attractive figure, but it may be necessary, and we as tax paying citizens can only hope the funds are being allocated properly.
According to the Legislative Analyst’s Office (LAO),
“The state excise tax on retail sales and the state tax on growing, as well as certain fines, will be deposited in a new special fund—the California Marijuana Tax Fund. Revenues deposited in the California Marijuana Tax Fund would first be used to pay back certain state agencies for any cannabis regulatory and administrative costs not covered by license fees” (Mitchell, 2-4).
With an already high cost of living in metropolitan areas of San Francisco and Los Angeles counties and an already increasing demand for the green, new and veteran consumers of Cannabis will pay the prices to relieve the stresses of the modern day work-life. With a mandate to sell lab tested products with proven results cultivators, collectives, customers, and the California Government want to know exactly what is being purchased and consumed. Additional costs are employed in cultivation, packaging, and transporting methods in order to meet the medicinal health demands of Cannabis patients. All to reassure the quality of California’s cash crop remains top shelf.
According to the Senate Bill 94, Chapter 27, Section 1.F, which regulates the medicinal and adult use of Cannabis:
“In order to strictly control the cultivation, processing, manufacturing, distribution, testing, and sale of cannabis in a transparent manner that allows the state to fully implement and enforce a robust regulatory system, licensing authorities must know the identity of those individuals who have a significant financial interest in a licensee, or who can direct its operation. Without this knowledge, regulators would not know if an individual who controlled one licensee also had control over another. To ensure accountability and preserve the state’s ability to adequately enforce against all responsible parties the state must have access to key information.”
All about the Green
Green equals Green, and California’s Cannabis department expects to bring in the revenue from the taxes imposed. As the Cannabis industries regulator, the State of California will ensure the regulations are enforced and the money is collected. The regulatory system in place will not only make sure the money is collected but with Cannabis and the strict policies infused into a growing industry, the regulators will also play allocators. With increased taxes, specifically 15% on top of already hefty sales tax rates, people would like to know where their money is going. Besides up in smoke, it seems the California Government spent some time to think about the money the Cannabis trees will bring in. The LAO informs us as to how this increased revenue will be allocated back into society.
, the LAO states the Governor’s Office of Business and Economic development will be receiving a lump sum of $10 million in 2018-19, with an annual increase of $10 million every year until 2022-23, and $50 million every year beyond 2023. (Mitchell, 4)
The LAO goes on to describe the purpose of such large amounts;
“Implement a community reinvestment grant program that would fund certain services (such as job placement assistance and substance use disorder treatment) in communities most affected by past drug policies” (Mitchell, 4).
Not a bad gesture by the state to give back to communities that were most affected by harsh Marijuana laws of the past. With the given opiate epidemic in our country, it makes sense for the Government to invest in the health of citizens, with regulatory policies omitted from the policies enforced on pharmaceuticals. Funds will also be allocated to the University of San Diego Center for Medical Cannabis Research to study Cannabis, specifically the risks and benefits of consumption, in the amount of $2 million a year. Additionally, the Marijuana Tax Fund will give to Universities in California to study the effects of the measure. The UC system will receive $10 million a year until 2028-29. Prop 64 indicates that the California Highway Patrol will also benefit from increased Cannabis taxation. CHP will receive $3 million in funds, and a nifty gadget referred to as the ‘potalyzer,’ designed by Stanford University, where they ‘fear the tree’ academically.
California even has laid out the plan as to where the excess profits will go. A whopping 60 percent of the surplus will go to the Youth Education, Prevention, Early Intervention, and Treatment Account.
“Funds would be allocated to the Department of Health Care Services to support youth programs including substance use disorder education, prevention, and treatment program” (Mitchell, 5).
Another 20 percent will be dispersed into the Environmental Restoration and Protection Account. The LAO notes the “Funds would be allocated to the Department of Fish and Wildlife and the Department of Parks and Recreation to clean up and prevent environmental damage resulting from the illegal growing of cannabis.” (Mitchell, 5) In an effort to balance out the extent of money distributed the LAO tells us that money will be recycled back to the environment. In hopes to provide better park playgrounds, facilities, and increased resources for community centers.
The last 20% of remaining revenue will go to the State and Local Law Enforcement Account where “Funds would be allocated to the California Highway Patrol to support programs designed to reduce driving while impaired, including by cannabis. Funds would also be allocated to the Board of State and Community Corrections to support programs designed to reduce any potential negative impacts on public health or safety resulting from the measure.” Rules begat regulations and the State of California knows it is about to roll in the dough, and this pie is big enough to dwarf other States where recreational Cannabis has been legal for some time now. (Mitchell, 5)
If we want a ballpark as to the potential for California’s tax revenue we must first look at two prime examples, from smaller consumer markets. The State of Washington and Colorado serve as excellent examples of the growth potential that allows us to make predictions on what is possible on a larger scale. Since 2015 the Washington State has seen steady growth in the State’s Marijuana Tax revenue. Statista reports that in 2015 Washington reeled in $64.88 million dollars, while in 2016 the number increased to $185.67 million. In 2017 that figure skyrocketed to $314.84 million dollars. So we can assume based on the numbers, that as Cannabis became more available and socially accepted, the more interest poured into the industry. The intrigue of your first time recreational customer, the Cannabis aficionados, and more importantly big money investors. The money poured in provided improved facilities in order to produce a better quality product for the benefit of more people.
The same example is shown in Colorado, where the Department of Revenue tracks the taxes and license and fee revenue. The Colorado Department of Revenue provides us with valuable information because California is also implementing a strict licensing process for a fee. These fees, invested in seed, provide for those in need. In 2014, the State of Colorado received well over $67 million from taxing Cannabis. That figure increased every year since; in 2015 more than doubled to over $130 million, followed by another bump in 2016 to $ 193 million. In 2017, like Washington state, Colorado experienced their highest profits to the sound of $247 million. In order to see the potential for California, we must search the demographics and find the difference. The U.S. Census Bureau lists Washington as having a little over 7.4 million people residing within there state borders, while Colorado boasts a population of slightly over 5.6 million. California has more people than Washington and Colorado combined. According to the U.S. Census Bureau population estimates for California as of July 2017, indicates there are around or about 39,536,653 million people.
Sheer numbers alone have investors salivating to profit from a legal market. Therefore, the cycle of green must continue to please and produce. Pleasing customers with quality product, will not just ease muscle tension and migraines of the user, but can also provide jobs for green collar families, and help an organic American industry thrive. The product of Cannabis is extremely valuable, synonymous with money. So from seed to sale, California looks to fit the bill, as millions may not be enough for this mean green.