California is increasing business tax rates on legal marijuana, a move that stunned struggling companies that have been pleading with the state to do just the opposite.
Hefty marijuana taxes that can approach 50 percent in some communities have been blamed for pushing shoppers into California’s tax-free illegal market, which is thriving. Industry analysts estimate that $3 are spent in the illegal market for every $1 in the regulated legal space.
The California Cannabis Industry Association said in a statement that its members are “stunned and outraged.”
The group said the higher taxes that will take effect Jan. 1 will make it even worse for the struggling legal industry.
“Widening the price … gap between illicit and regulated products will further drive consumers to the illicit market at a time when illicit products are putting people’s lives at risk,” the group said, referring to the national vaping health crisis.
The changes involve taxes paid by legal businesses, which ultimately get passed along to consumers at the retail counter.
Josh Drayton of the cannabis association predicted that an eighth-ounce purchase of marijuana buds, typically priced around $40 to $45, would be pushed up to $50 or more in the new year.
For consumers, “ultimately, they’ll feel that at the register,” Drayton said.
A major change involves what’s known as the mark-up rate, which is used when calculating taxes in certain business transactions, such as when a retailer purchases wholesale cannabis that will in turn be sold to consumers. The mark-up rate is being pushed up over 30 percent.
Separately, cultivation tax rates are being increased by inflation, as required by law. For example, the tax on an ounce of dry buds will climb to $9.65 from $9.25, an increase of just over 4 percent.
And of course the big story of the week from US News and World Report:
A COMPREHENSIVE marijuana legalization measure passed the House Judiciary Committee Wednesday, marking the first time that a sweeping cannabis reform bill has cleared a congressional committee.
The passage comes on the heels of a full House vote in September approving the Banking Act that would protect banks that do business with cannabis companies and signals that nationwide marijuana legalization is no longer a taboo issue for our elected officials to talk about.
Even though this was quite a historic vote, the reform measure faces uncertain odds of reaching the House floor and has a near-zero chance of being put up for a vote in the Republican-controlled Senate. Although speaking with Jason Beck from 420 Impac on Wednesday, he said he thinks McConnell will “do the right thing”.
Marijuana remains illegal at the federal level, but 11 states now have laws on the books legalizing the recreational use and nearly three dozen states have legal medical marijuana programs.
The House Judiciary panel voted 24-10 to approve the Marijuana Opportunity Reinvestment and Expungement Act, or MORE Act, which was introduced by Rep. Jerry Nadler, D-N.Y. Two Republicans – Rep. Matt Gaetz of Florida and Rep. Tom McClintock of California – voted with Democrats to pass the bill.
The comprehensive measure ties together several policies popular among progressives: It would remove criminal penalties for marijuana, take the drug off the federal controlled substances list, expunge conviction records and invest money into communities that have been disproportionately affected by prohibition.
Advocates, who see this as a social justice issue because of the effect of prohibition on certain communities, were thrilled about the bill’s passage. There are too many people sitting in jail for low level marijuana offenses and it really is time to get them out.
Erik Altieri, executive director that the National Organization for the Reform of Marijuana Laws, said in a statement. “This is a truly historic moment in our nation’s political history. For the first time, a Congressional committee has approved far-reaching legislation to not just put an end to federal marijuana prohibition, but to address the countless harms our prohibitionist policies have wrought, notably on communities of color and other already marginalized groups.”
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