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california cannabis taxes

If the California cannabis industry wants to compete with the illicit market, it’s time to cut the cultivation tax

We’ve known California’s outrageous cannabis taxes are hurting its industry, but now we have a study to back up the claim. Reason Foundation, Good Farmers Great Neighbors, and Precision Advocacy found in a new study that California could increase legal sales and bring in 123% more cannabis-related tax revenue by 2024 if the state would just cut the dang cultivation tax.

“California could double monthly cannabis tax revenues by 2024 by eliminating the cultivation tax. Without the cultivation tax, our data show lower cannabis prices would increase sales of legal products, increasing the state government’s general sales tax revenue and more than replacing losses from the eliminated cultivation tax,” says Geoffrey Lawrence, director of drug policy at Reason Foundation.

High taxes have taken a heavy toll on California’s legal market. Based on California’s population and adult-use rates, the legal industry has failed to meet expectations, reaching just one-third of its expected size. So how’s everyone getting their weed? Well, the new study supports what we’ve long known: nearly two-thirds of cannabis sales in the state take place in the illicit market. 

How bad is it, really? In Oregon, you can expect to pay an average of $340 in taxes for every pound of cannabis purchased. In Colorado, the average tax spent on a pound of weed is $526. In contrast, Californians can expect to spend around $1,441 in taxes per pound. With all the money not going to sky-high tax rates, the study found that Coloradans spend 335% more per capita and Oregonians spend 378% more per capita on legal cannabis. (Which is not to negate that legal Oregon growers still have a hard time competing with the illicit market.

Along with eliminating the cultivation tax, the study recommends reducing retail excise taxes and incentivizing local governments to stop banning legal cannabis sales. Oregon has a legal retailer for every 6,145 residents, Colorado has one for every 13,838 residents, yet California has just one legal retailer for every 29,292 residents. 

“We cannot allow the largest cannabis market in the world to fail. This study provides a roadmap of tax policy solutions for the governor and state legislative leaders to consider immediately,” said Amy O’Gorman Jenkins, president of Precision Advocacy and legislative advocate of the California Cannabis Industry Association

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