Indopedia All Things Marijuana
Californians will be able to buy legal recreational cannabis as of January 1st, 2018, but a new report by Fitch Ratings has raised concerns that high taxes could push these buyers to the black market, according to the Washington Post. The credit rating agency’s report estimates that combined state and local taxes could reach as high as 45% in some areas — higher than any other state except Washington, which levies a 50% tax. The report warns that “the existing black market for cannabis may prove a formidable competitor to legal markets if new taxes lead to higher prices than available from illicit sources.”
The high tax rates are the sum of multiple smaller taxes originating from state and local levels. The state levies a 15% excise tax, in addition to cultivation taxes. Localities will also impose both business and sales taxes, which could be between 1 and 20%. Each local government is also able to decide whether or not to allow canna-businesses in its area, which will create uneven distributions of marijuana tax revenue throughout the state.
California is currently the largest producer of black market cannabis in the country, with illegal farms growing an…
