Legal CA marijuana could be so expensive it acts as a boon to the black market...

[I Push Buttons]

"California to tax pot as much as 45%"

So much for drug legalization ending the illegal drug trade...

Buying legal marijuana in California could be pricey enough to keep the black market healthy.

Between customers, retailers and growers, taxes on cannabis may reach as high as 45% in parts of the state, according to a Fitch Ratings report. Those high taxes may keep consumers away from legal marijuana stores once the recreational retail market goes live on January 1.

"High effective tax rates on California cannabis may complicate the state's efforts to establish legal markets" said analysts Stephen Walsh and Karen Ribble in a Fitch Ratings report on California's marijuana taxes.

California marijuana consumers are going to have to pay a combination of state and local taxes that vary by municipality. Growers and sellers have their own taxes, too.

Consumers will pay a sales tax ranging from 22.25% to 24.25%, which includes the state excise tax of 15%, and additional state and local sales taxes ranging from 7.25% to 9.25%.

Local businesses will have to pay a tax ranging from 1% to 20% of gross receipts, or $1 to $50 per square foot of marijuana plants, according to the Fitch report.

In addition, farmers will be taxed $9.25 per ounce for flower, and $2.75 per ounce for leaves.

The Fitch report says this combination of state and local taxes for consumers, retailers and growers could keep portions of
California's cannabis industry off the grid, where it has flourished for some time.

"California's black markets for cannabis were well established long before its voters legalized cannabis in November 2016 and are expected to dominate post-legalization production," said the Fitch report.

Among the eight states where recreational marijuana is legal, only Washington has a higher tax rate at about 50%.

Colorado and Nevada both follow with rates of 36%. Oregon has a tax rate of 20% and Alaska has a rate of up to 20%.

Medical marijuana has been legal in California since 1996, but the retail markets for recreational marijuana are just now ramping up and are scheduled to begin on New Year's Day.

Black market farmers already face considerable obstacles to becoming compliant with state law, even without the taxes.

Van Bustic, a specialist in the environmental impact of cannabis cultivation for Berkeley's College of Natural Resources, said that registering with the state and becoming compliant will cost about $100,000. He said that many Humboldt farmers are unlikely to shoulder that cost if they can continue to operate in the dark.

The Fitch report says the black market could prove to be a "formidable competitor" to legal weed, if taxes push prices significantly higher than illegal, tax-free pot.

Other analysts agree that high taxes could actually be a boon to the black market.

"If taxes increase the price of cannabis beyond a certain point, the legal market becomes less competitive than the illicit market and then consumers become less likely to make the transition from the illicit market to the legal market," said John Kagia, analyst for New Frontier Data, which tracks the cannabis industry.

The Fitch report says this dynamic has already prompted Colorado, Washington and Oregon to lower their "initially uncompetitive" tax rates.

"It's almost certain that all of the states with recreational marijuana still struggle with the black market for marijuana because of its prevalence before legalization," said Morgan Scarboro, a policy analyst for the Tax Foundation's Center for State Tax Policy.

She said that high tax rates "will prevent the minimization of the black market" and that state governments "need to be open to evaluating their marijuana tax structures."

Colorado, Washington and Oregon have tried various tax structures, with mixed results, according to Kagia.

Oregon started in 2015 with a weight-based sales tax of $35 per ounce but changed that to a percentage sales tax of 20%.
Colorado got rid of a 2.9% sales tax but rose its excise tax from 10% to 15%, effectively raising its tax rate.

Washington started out with a 25% tax rate on producers and another 25% on processors, in addition to a 25% sales tax. Officials changed that to a 37% flat sales tax for cannabis that's in addition to standard state and local sales taxes.

"The only state that we know of that has undertaken a radical tax transformation is Washington," said Kagia, but he added that Washington still has the highest cannabis sales tax in the country.

Of the eight states where recreational marijuana is legal, three, including California, haven't yet started retail markets.

Massachusetts is expected to have a tax rate of 24% when it starts up its retail market in July of 2018, according to the Fitch report.

Maine has not yet established its tax rate.

[Total Crica]

??? This would apply to any legal thing sold on the black market for no taxes, not just Mary Jane.

[I Push Buttons]

??? This would apply to any legal thing sold on the black market for no taxes, not just Mary Jane.

Exactly... Even more so than any other industry since the illicit drug industry is so well established.

But look in literally any thread on here for the last several years about drug legalization, the argument put forward by every other legalization advocate is that legalization would end the illicit trade, an argument not grounded in reality.

[belfpala]

??? This would apply to any legal thing sold on the black market for no taxes, not just Mary Jane.

It's going to happen if there's a price discrepancy for any reason.

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the argument put forward by every other legalization advocate is that legalization would end the illicit trade, an argument not grounded in reality.

It's not legal yet.

[Machismo]

Well, when you push too many taxes and regulations, the black market will find a way around them. This has always been the case.

The black market IS THE FREE MARKET. So long as you have regulations, people will attempt to go around them, because the demand is till there, and circumventing them will be cheaper. This is the most ridiculous attempt at an argument I have seen on the issue. The tax will be high, and the regulations are extremely costly, often for no good reason at all.

Let's not forget, it's still not legal at the national level. Someone needs to take an economics class or two.

[Deleted]

That doesn't exactly break the norm in regards to taxed items. Tobacco and alcohol being sold without taxation, was a higher percentage back when the taxes were initially introduced, and slowly moved towards almost none existence, but it is still there if you know the right people.

It is a valid argument that it might be taxed too high and hence encourages black markets, but that is when you can lower the tax on it.

Also the police still exists, and now instead of stopping every pot smoker, they can just stop people to make sure that their weed is taxed

[owbu]

Sounds like they will have to lower taxes and crack down on illiegal production, if those guys turn out to be right.
The legal product always has the advantage of not getting you arrested and having higher health standards, so there should be a sweet spot in there somewhere.

[belfpala]

Also the police still exists, and now instead of stopping every pot smoker, they can just stop people to make sure that their weed is taxed

I was actually stopped two times by NYC cops wanting to look at my pack of tobacco cigarettes to make sure it had the NY tax stamp on it. It's in the realm of possibility.

This was early on in tobacco taxation, when NYC lead the world in cigarette taxes. They weren't going after the individuals, but rather larger groups who were importing cigarettes from other areas.

[IIamaKing]

But look in literally any thread on here for the last several years about drug legalization, the argument put forward by every other legalization advocate is that legalization would end the illicit trade, an argument not grounded in reality.

It is, but if they over tax it, past the point of current black market prices, it wont. Its a cash cow, but the udders can get chapped. The goal should be to get legal weed down to 10 bucks a gram for top shelf chronic, after taxes. If they cant do that, well yeh, people will go buy it cheaper.

You cant make it legal, make it cost more than illegal weed then be shocked when people still use the black markets.

[Allybeboba]

What is the tax percentage on cigarettes? Is there a huge black market on cigarettes?

[Taso]

Well a tax on pot is better then jail but 40% is way to high just put it at 10% or the same level as alcohol and nicotine/tobacco.

[Kathandira]

Well a tax on pot is better then jail but 40% is way to high just put it at 10% or the same level as alcohol and nicotine/tobacco.

In NJ Cigarettes are taxed at $2.70 per pack. On average, they cost $8.50 per pack. That's a 31% tax rate.

Alcohol in NJ is our regular sales tax rate, which is 7%. There is no special tax on it here.

[Sky High]

taxing and regulating it isn't a problem in theory, but it being that high compared to tobacco and alcohol is god damned retarded.

granted the growers in the north need to get with the times and upgrade or be shoved out, because currently all those flower children produce a lot of waste and environmental damage from growing a plant.

[Kathandira]

taxing and regulating it isn't a problem in theory, but it being that high compared to tobacco and alcohol is god damned retarded.

granted the growers in the north need to get with the times and upgrade or be shoved out, because currently all those flower children produce a lot of waste and environmental damage from growing a plant.

Touching on that point. Currently weed is grown by people like that. 'Mom and pop' operations, small businesses. If and when it is federally legalized, it will be mass produced in indoor factories. With that mass production, and competition from larger private companies, the initial price should come down, which should lessen the tax burden on the purchaser.

[Independent voter]

It will be like Colorado, you'll have the legal market and the unlegal market. Nobody wants to buy the legal stuff because it's too expensive and the dealers don't make house calls.

So now on top of the illegal market which Colorado has always had, they now have to spend tax money regulating the legal market.

[Kathandira]

It will be like Colorado, you'll have the legal market and the unlegal market. Nobody wants to buy the legal stuff because it's too expensive and the dealers don't make house calls.

So now on top of the illegal market which Colorado has always had, they now have to spend tax money regulating the legal market.

Call me crazy, but I would much rather support my state and pay the extra fee to get it legally. It also bolsters the tax income for other states to see which will hopefully convince other states to also legalize. If 90% of the US legalized, the Fed will really have no choice but to make it federally legal.

[Sky High]

So now on top of the illegal market which Colorado has always had, they now have to spend tax money regulating the legal market.

well, they certainly have the spare money for it...

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Touching on that point. Currently weed is grown by people like that. 'Mom and pop' operations, small businesses. If and when it is federally legalized, it will be mass produced in indoor factories. With that mass production, and competition from larger private companies, the initial price should come down, which should lessen the tax burden on the purchaser.

indeed, but currently it really isn't that more expensive to invest in some solar panels and geting rid of the gas generator.

[Kathandira]

well, they certainly have the spare money for it...

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indeed, but currently it really isn't that more expensive to invest in some solar panels and geting rid of the gas generator.

Totally agreed.

[Beazy]

You should check out how the 15% higher tax rate hike on Pot in CO happened, and the pot is still cheaper than buying off the street. The state could tax it at 50% . . . and it will still be cheaper to buy legally.

Im not sure why people think weed is more expensive legally than on the street. Even AFTER the hike in prices in CO, 7 grams on the street goes for 100 to 120 depending on the state you live in, in CO (after TWO tax hikes) its 65 to 75.

[s_bushido]

"California to tax pot as much as 45%"

So much for drug legalization ending the illegal drug trade...

So I'm guessing you see no correlation between holier-than-thou fuckwits who insist on trying to keep it illegal, and it being taxed to the point of inviability? Of course you don't.