California Raises Taxes on Legalized Marijuana
Friday, November 10, 2017

California Raises Taxes on Legalized Marijuana

It has become a hot trend throughout the country. More states have voted to legalize marijuana. Last year Florida voters approved a bill to legalize pot for medicinal purposes. But when it comes to recreational use, California has become one of the most popular destinations to purchase marijuana. But that could change soon. New hefty taxes and fees will not only affect the price of pot in the Golden State, it could also soon influence where marijuana is grown.

Could High Taxes Allow California’s Marijuana Black Market to Grow?

From a historical perspective, California has long been the leader of the legalized marijuana movement. The state originally decriminalized marijuana in 1975. By 1996, it became the first state to legalize pot for medicinal purposes. Although the movement to legalize marijuana for recreational use hit a snag in 2010 when Proposition 19 was voted down, it was finally legalized under Proposition 64 on November 8, 2016 for adults 21 and older.

Pot is also relatively affordable in California. A small bag of marijuana of quality medicinal marijuana in Los Angeles cost roughly $35–good enough to roll five or six joints. But once the new sales tax takes effect in 2018, that same bag of pot is expected to cost between $50 to $60. Do the math and that is a 70 percent increase.

With the price of medical and recreational marijuana is expected to increase, many believe it could also have a huge effect on California’s pot growers. When cannabis is harvested, the plant is divided into two parts. The plant buds are the portion consumers use to smoke. The loose leaves are then used to produce products, such as candies, concentrates and cannabis-based foods. Marijuana growers will typically sell these leaves to manufacturers for about $50 a bag. But starting in 2018, California will begin taxing those same leaves for $44 per pound. It could bring huge economic consequences for the state’s marijuana farmers. For example, a 7 pound bag of pot would significantly surpass the market value price which could make the product valueless.

Why Is California Increasing Taxes on Marijuana?

Higher tax increases are expected to result in a bigger black market. But there may be a method to the madness. Some economic experts see California’s strategy as an effort to transform the state’s medical and black markets into a multi-billion-dollar-regulated economy. It would make California into the nation’s largest marijuana store. Many compare it as one of one of the state’s biggest undertaking since prohibition.

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