California to Tax Recreational Marijuana Heavily; Not the Best Idea to Beat Cannabis Black Market

Recreational Marijuana, Marijuana

From the moment marijuana was legalized in California, there were expectations that it was going to be a budding business. It has not taken long for most dispensaries offering cannabis experiencing such success. From the Marijuana’s Business Factbook 2017, there is a report that shows the steady growth of the marijuana business in the U.S. The numbers have been increasing steadily with a projection of 45% growth in 2018. It further explains that the industry will generate up to $17 billion annually just in sales. It is the reason you will see more investors going into the marijuana business.

The success of pot in terms of sales is thanks to the change in the way people think about using marijuana. Gallup is a research company that has been conducting surveys on cannabis since 1969. They reported that in 2017, about 67% people interviewed favored the legalization and use of marijuana. This is quite an increase from low numbers such as 25% in 1995. It was during this time that California became the first state in the U.S. to legalize the use of marijuana. The shift in opinion is what has drove marijuana sales high.

The legalization is not entirely a bad thing as more states have done so over the years. At the moment, we have 29 states that have legalized the use of marijuana. Even in states that have not finalized the legalization, the residents have voted in favor of legalizing weed.
The motivation for making weed legal could also be affected by the amount of money it is possible to make by selling it. Taking Colorado as a sample, in 2016 marijuana generated a revenue of $1.3 billion in sales and earning the state $200 million just in tax revenue. It just shows that with proper control, the various states could earn a lot from it.

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What are the effects of more tax on marijuana?

In 2016, there was another change in California when it comes to selling of weed. There was a proposition to allow for selling of recreational weed alongside marijuana. The introduction of recreational pot is expected to earn California an additional $1 billion annually. That is a lot of money that the state would be earning from the sales of cannabis.

But, some people are now happy even with the recreational weed regulations being introduced in California. The reason is because of the amount of taxes that would be levied on the marijuana. The high taxes are likely to make recreational marijuana unpopular. This is going to push most consumers of recreational pot back to the already established black market.

So, what is it so bad about the taxes? The Proposition 64 bill is what was used to vote for allowing recreational marijuana. You have to understand more about what the document is all about. The pass for recreational pot comes with additional two categories of taxes. The first one is the state cultivation levy, which will charge $9.25 per ounce of the cannabis flowers. The second type is the 15% excise tax on what you have as the final product. Having too much taxation is just going to drive more people back to the black market where everything is cheap.

Look at Canada for inspiration

Canada is looking to legalize recreational pot by July 2018, which is going to be the first developed country to fully legalize marijuana. In the creation of its legislation, it borrowed heavily on the laws and expertise of states such as Washington, Oregon, and Colorado. The tax policy marked in the legislation is also seen to be highly favorable. The overall estimates of the taxes on recreational marijuana are expected to be lower than that of alcohol in the country.
With such competitive tax rates, it would make the recreational marijuana to be affordable to most people. This will eliminate the trouble of having to use the black market to get your dose of marijuana. It is also seen as a way of eliminating the black market for marijuana.

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It is not surprising that you get the Canadian-based pot growers having the best performing marijuana stocks. Such companies include Aphria and Aurora Cannabis. Aphria is even looking to implement an expansion program that would see it yielding over 100,000 kilograms of dried weed per year.

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Comments (1)

  1. Avatar for stuart amilley stuart amilley November 20, 2017 / 11:22 am / Reply

    I agree with you. its not the ideal decision.

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