Pubdate: Thu, 18 Feb 2016
Source: SF Weekly (CA)
Column: Chem Tales
Copyright: 2016 Village Voice Media
Author: Chris Roberts


California's cannabis gold rush has at last reached the august halls 
of government. Noting that legal sales of medical cannabis exceed $1 
billion annually, state Sen. Mike McGuire (D-Healdsburg) last week 
unveiled a proposal that would make California's biggest cash crop 
one of the most heavily taxed commodities in the state.

Under McGuire's "Marijuana Value Tax Act," a 15 percent tax would be 
slapped on medical cannabis at the point of sale. This would be added 
to taxes already paid on weed: state sales tax - 8.75 percent in San 
Francisco and 9.5 percent in Oakland - and any local taxes applied by 
local governments (which in Oakland is another 5 percent).

If this happens, marijuana sales would be taxed at nearly 30 percent 
in Oakland - where annual sales from its eight licensed dispensaries 
exceed $68 million, according to a city government estimate - and at 
a mere 25 percent in San Francisco (where our 28 licensed 
dispensaries rake in, well, nobody knows). This would mean medical 
cannabis is taxed more heavily than cigarettes, more heavily than 
alcohol - and certainly more heavily than prescription drugs, which 
are not taxed at all.

McGuire, who represents plenty of cannabis growers (and their angry 
neighbors) in Sacramento, believes the tax could raise up to $100 
million annually. He wants the pot tax to help pay for the new 
state-level marijuana bureaucracy overseeing the cannabis industry, 
the Bureau of Medical Marijuana Regulation - created last fall, but 
not yet in existence. Cannabis taxes would also go to state parks, 
state wildlife and natural refuges, and (ahem) state law enforcement.

McGuire's proposal has precedent: It's in line with the proposed 15 
percent tax that would be paid on sales of recreational marijuana 
under the Adult Use of Marijuana Act, the Sean Parker-funded voter 
initiative attempting to qualify for the November ballot.

All of this goes to show one thing, at least.

"They [state lawmakers] definitely see cannabis as an ATM," as one 
marijuana industry policy lobbyist working at the Sacramento level put it.

Passing taxes in California is no small feat - you need two-thirds 
approval in the Legislature, and supporting more taxes in one of the 
country's most tax-happy states is seen as a real political liability.

But this is cannabis, a fringe product consumed by less than 20 
percent of California's 40 million people, most of whom appear fine 
with slapping a "sin tax" on a plant that was outlawed for most of 
their lifetimes. And in the cannabis industry, there is support to 
pay taxes - taxes mean legality and legitimacy and also mean some 
measure of protection from the government.

Just not 30 percent in taxes, the notion of which is leading some 
cannabis business people to rediscover their libertarian sides.

"It's too much," says Debby Goldsberry, executive director of 
Magnolia Wellness in West Oakland, who notes that, thanks to federal 
prohibition on weed, dispensaries can't withhold the cost of product 
from their business taxes. That means the cost of the excise tax 
would be passed onto the consumer, who already pays upwards of $15 to 
$20 a gram at retail (on a product that can cost as little as $600 a 
pound to produce).

"It could make it impossible to do business," she says, "and if they 
take it too far, it will just drive people back to the black market."

In fairness, the industry has yet to fully come out of the black 
market. As many as 75 percent of the state's dispensaries are 
operating without Board of Equalization seller's permits, BOE 
officials estimate, meaning they're dodging the taxman. (Though such 
games don't last forever, as Robert Martin, the former operator of 
the old San Francisco Medical Cannabis Clinic on 10th Street who owes 
the BOE $1.6 million, has found.)

Industry lobbyists are so far taking a neutral stance on McGuire's 
proposal. Hezekiah Allen, the head of the California Growers' 
Association, says his group has taken no stance. Similarly, Nate 
Bradley, executive director of the California Cannabis Industry 
Association, says his group has yet to take a position - but repeated 
some of Goldsberry's fears.

"We want and 100 percent agree with the need for taxes - it's good to 
recoup costs, and it's good for a regulated industry to put money 
back into local and state governments," he said. "We just want to 
make sure it's balanced and doesn't encourage a black market to 
continue to exist."

There's support in other states for the black market argument. In 
Washington state, where recreational cannabis is taxed at an 
astounding 37 percent, there are reams of anecdotes of consumers 
saying "no thanks" and sticking with their friendly neighborhood drug 
dealers. Then again, the state is expecting sales to exceed $150 
million in 2016 - up from $67.5 million last year - meaning there are 
enough consumers willing to fork over serious taxes in exchange for 
lab-tested weed sold in a store.

Which suggests if McGuire's tax passes, people will pay it. Even if 
it doesn't, government is most certainly in the cannabis game to stay 
- - and it's in it for the money.
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MAP posted-by: Jay Bergstrom