Wednesday, December 8, 2021

So much for legalizing marijuana...

 

I have to laugh at the current mess in the California marijuana "industry".  Citizens there voted to legalize marijuana, and the state set up a structured "industry" - complete with taxes, etc.  Trouble is, they taxed it too heavily.


Two and a half centuries after the Boston Tea Party, legal cannabis operators say it might be time for a California Weed Party.

But rather than dump their agricultural product into the Pacific Ocean, shop owners and others are floating the idea of withholding their state tax payments. This year, that could add up to $1.3 billion.

The goal is to express frustration with the state of the industry in California, where legal cannabis merchants struggle to compete with illicit operators who have a huge price advantage specifically because they don’t follow the rules.

. . .

Since voters opted to regulate cannabis in 2016, all products legally sold in California have come with a 15 percent excise tax. Cultivators also pay a tax based on the weight of what they sell, which in turn bumps up the retail price. Then there’s regular state sales tax, which typically runs between 8 and 10 percent. Plus, cities and counties that allow marijuana businesses typically tack on local cannabis taxes, which can reach as high as 15%.

It all adds up to an effective tax rate for California cannabis businesses that can easily top 45%.

. . .

But, to date, the high tax rate — and the revenues collected — have done little to level the playing field. California’s underground cannabis business is estimated to be twice as big as the legal side of the industry.

And the legal operators suffer because the costs of following the rules inevitably get passed along to consumers, exacerbating the price gap between legal and illegal cannabis. Products sold from underground shops and hustlers with backpacks often cost half as much as the products sold in Kiloh’s licensed L.A. store, he grudgingly acknowledges.

. . .

That daunting outlook might be why the legal side of the industry is shrinking. In 2018, there were roughly 16,000 licenses for cannabis businesses in California, a figure that by 2020 had fallen to about 10,000 licenses, according to an analysis earlier this year by the Legislative Analyst’s Office.

Some of those operators surely left the state or industry entirely. But Kiloh said he personally knows many who simply returned to an unregulated industry that’s thrived since Californians became the first in the nation to loosely legalize medical marijuana in 1996.


There's more at the link.

Everybody keeps piling on with new taxes, too.  San Francisco has just been forced to suspend its local marijuana tax for a year because of the proliferation of unlicensed weed.  Legal shops there can't cope with their lower-priced illegal competition, and the new tax would have made it even worse.

The states where marijuana is legal have also become major supply points for the states where it isn't.  US 287 is a highway that runs down from the Canadian border, through Colorado, into northern Texas, where it makes a sharp left turn at Amarillo and cuts down to Dallas/Fort Worth.  Drug dealers there are constantly trying to ship carloads of weed from Colorado (where it's relatively cheap compared to local prices) to DFW.  I doubt a week goes by without Miss D. and/or myself seeing an old, rusted pickup truck or van, or a U-haul or Penske or Budget rent-a-truck, pulled over on Highway 287, with a couple of cop cars (state troopers, sheriff's deputies or town police) enthusiastically rooting through it.  They usually find what they're looking for.

Legalizing marijuana doesn't make things better.  It's like the many places that have legalized prostitution over the years.  Very often the increased regulation, medical examinations and certifications, etc. that have accompanied legalization meant increased prices to pay for them.  Therefore, many prostitutes continued to ply their trade illegally, rather than accept the expense and additional hassle of jumping through the necessary hoops to obtain a permit.  A lot of places tried to tax prostitutes' income, with a predictable lack of success.  As one Dutch newspaper famously observed, "What are they going to do - install a parking meter next to the bed, charging customers according to the time spent there?"

Laws against immorality simply don't work - just like preaching against immorality.  In the latter case, it's important to remind people what's right and what's not in one's system of belief, but whether or not they'll comply is up to them.  Those who want to do the right thing will do it.  Those who don't want to, won't.

It's like the poster put up outside an evangelical church in London, England some years ago.  It read:  "Brother, if you're tired of sin, step inside!"  It didn't take long at all for someone to add underneath, in bold black marker ink, "If you're not, call this number!"  So much for morality . . .





Peter


11 comments:

Joe said...

In Canada pot is legal so, out of curiosity, I tried one and took two deep inhales a couple months ago...
My body had quite the violent reaction of immediately being sick and throwing up a foreign substance that it couldn't get rid of.
Felt dizzy and sick which told me that I can't be a pot head.
Man oh man, that stuff was potent and strong from what I remembered from the past experience trying it and doing nothing for me.

Steve said...

So when a government steps in and creates an artificial business environment.....the industry finds a way around the laws? Is that what you are saying?
Could this scenario apply to ANY other industries that the government tries to mess with!??!?!?

roadgeek said...

It's never ceased to amaze me that mules carrying drugs continue to transport product on main highways. US 287 is not the only way to get from Denver to D-FW. There are myriad small back roads available in all three states that would allow for a more discreet passage. The cops cannot patrol every highway, and in many cases there are even county roads or local roads that would serve the purpose just as well. I continue to marvel at the drug interdiction on main highways, when anyone with a detailed map book (DeLorme makes a fine series of state map books) could make the trip while staying off the Interstates. Yes, it'd take longer, but you could make the trip unimpeded.

oldvet1950 said...

Sort of reminds me of the cigarette sales in Florida a few years ago. When the taxes went up on them, the Indian reservations (that sold tax free cartons) raised their prices, too, but still kept it under normal retail. So I guess the CA gov't is actually helping the cartels?

heresolong said...

Joe, pot has been bred for increased THC levels for years now. The mild buzz from the 60s has been replaced in the interests of marketing and more effect.

Generally, taxing anything leads to an increase in the black market. It has also been said (can't remember by whom but seems that it was in the 1700s when our system was being debated) that the best place to raise tax revenue is on unnecessary and luxury items. People who are buying necessities can buy what they need at lower cost, the government then runs on people who have excess money to spend.

JaimeInTexas said...

"Legalizing marijuana doesn't make things better. "

There is legalizing and then there is legalizing.

Marijuana should not have been criminalized in the first place. Penalties for things like DWI, sure, but the so- called "War On Drugs" has done nothing but expand the abusive power of the government(s). For example, the horrendous civil asset forfeiture.

We are less free because of such things as drug laws.

Prohibition of alcohol required a Constitutional amendment. Now, the Constitution is a list of suggestions for the citizens and a Carte Blanche for the FedGov.

edutcher said...

Lefties can't just do something, they have to control it, usually with regs and taxes so the thing they thought would be good turns out to be, "Why did we bother?", for most of the people that crusaded for it.

The Wages of Sin writ small.

Sherm said...

Interestingly, Montana legalized recreational marijuana but the largest town in the state, had a referendum vote that keeps it illegal to open a dispensary within the city limits. In theory it's okay but in practice, keep it in someone else's back yard.

MNW said...

This is almost as funny as when NY almost doubled the price of cigarettes and almost bankrupted the lottery as a result.

Lotto ticks are an incidental purchase, they go to the corner store for smokes see the lotto and buy. When they 2x the price that dropped off to make the lotto border line insolvent.

These people have zero understanding if economics

Aesop said...

O, if only some (thousands and thousands) of us had told, and told, and told, and TOLD anyone with two functioning brain cells, that the cartels would give the crap away to drive brick and mortar storefronts out of business just because of the overhead for rent and utilities, to retain market share, and that this was a jackassical idea, that would NEVER work, but only multiply the problems with every other illicit drug, forever.

O, wait, nevermind, that's exactly what happened, a now lo and behold...

tsquared said...

I have a cousin in the production side of the business for the past 10 years. He has hinted that half of their product goes through the state regulated stores and the other half is black market.