Tags: Jeff Sessions | Marijuana | weed | tax | recreational marijuana | black market

LA Times: Cali's High Weed Tax May Just Bolster Black Market

LA Times: Cali's High Weed Tax May Just Bolster Black Market
(Damian Dovarganes/AP)

By    |   Tuesday, 31 October 2017 03:51 PM

Sky-high state and local taxes on marijuana in California could reportedly blow away legal recreational pot stores when they go live Jan. 1 — and give a boost to the black market.

According to the global credit ratings firm Fitch Ratings, the tax bite could surpass 45 percent in some parts of California, the Los Angeles Times reported.

"High tax rates raise prices in legal markets, reinforcing the price advantage of black markets," the firm said in a report Monday, the LA Times reported.

"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."

Even increased enforcement might take a hit because "high taxes may complicate such efforts by diverting in-state sales to the black market," the report said, according to the LA Times.

According to the newspaper, California is set to issue licenses to grow, transport, and sell medical and recreational marijuana Jan. 1 and will charge a 15 percent excise tax, as well as a state cultivation tax of $9.25 per ounce for cannabis flowers and $2.75 per ounce for leaves.

In addition, local business taxes have been approved by 61 cities and counties ranging from 7.75 percent to to 9.75 percent, the newspaper reported.

Among the eight states where recreational marijuana is legal, only Washington has a higher tax rate — at about 50 percent, CNN Money reported.

"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," John Kagia, analyst for New Frontier Data, which tracks the cannabis industry, told CNN Money.

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California's legal recreational pot stores go live Jan. 1, but high state and local taxes are going to give rise to the black market and potentially undersell legal vendors, the Los Angeles Times reported.
weed, tax, recreational marijuana, black market
Tuesday, 31 October 2017 03:51 PM
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