Californians See Marijuana Tax Sticker Shock, and There’s No Relief in Sight

California cannabis users got a surprise at the start of the year, when new taxes on cannabis purchases kicked in for the newly legal industry.

San Jose resident Crystal Campisi, 61, is a medical consumer who has said the new taxes have eaten into her savings. Combined, her state, city, and county taxes on cannabis purchases have reached more than 34 percent.

“Seniors over 60 are getting hit really hard,” Campisi said. “A lot of medical patients are going back underground to the black market. Like if we want the oil, we’re buying it from weed guys. … What happens there, none of the product is tested. It’s a safety issue.”

Some consumers like Campisi are hoping state and local lawmakers will lower cannabis costs for senior medical users. A group of five California legislators backed  a bill that would lower taxes on all cannabis consumption — both medical and recreational — and cultivation for three years to bolster the burgeoning legalized industry, but AB 3157 failed to make it out of the Assembly appropriations committee in late May 2018.

The assembly bill would have reduced taxes on cannabis purchases — both medicinal and recreational — from 15 percent to 11 percent for three years in an effort to combat the strengthening of a black market. Taxes on cultivation under the Assembly bill would be eliminated entirely.

“The reason we came up with that number, any time you tax the product over 20 percent it ends up being unsustainable,” said California Republican Assemblyman Tom Lackey, who backed AB 3157.

“The black market has no rules so they produce the product at a considerable discount and consumers are very sensitive to price,” Lackey said. “There are some things we can learn from other states. When they reduced the tax rate it allowed the regulatory market to compete against the black market. … It’s not just going to be able to compete because it’s legitimate. People are sensitive to price. It’s just human nature.”

But some critics say lowering taxes is bad policy and unregulated businesses will eventually fade away.

Clearly, eliminating the black market in marijuana is a policy goal, but it would be a mistake for policy makers to lower taxes to try to compete with black market prices — that’s a ‘race to the bottom’ we should resist,” said Stanford University law professor Rob MacCoun, who is a public policy analyst.

“I believe that with time the black market will fade away, and since we’ve lived with it for decades, it isn’t like this is a new crisis. It is true that medical marijuana users have been hit with taxes they didn’t used to pay, but that’s against a backdrop of steadily dropping pre-tax prices which I expect will continue.”

For their part, a representative for the state’s Bureau of Cannabis Control said the bureau sensitive to the needs of medical users like Campisi and is looking for solutions to ease the sticker shock.

“One of the main things we’re looking at are those compassion programs,” said Alex Traverso, the bureau’s chief of communications. “If you’re on a fixed income or very sick — they’re more focused on the very sick, elderly — there are retail locations that would give away cannabis to certain folks. Everything is up for discussion.”

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