Please ensure Javascript is enabled for purposes of website accessibility
California Pot Taxes Lag as Illegal Market Flourishes
gvw_ap_news
By Associated Press
Published 6 years ago on
January 11, 2019

Share

LOS ANGELES — Deep in Gov. Gavin Newsom’s new budget is a figure that says a lot about California’s shaky legal marijuana market: The state is expecting a lot less cash from cannabis taxes.
The Democrat’s proposed spending plan, released Thursday, projects the state will bank $355 million in marijuana excise taxes by the end of June. That’s roughly half of what was once expected after broad legal sales kicked off last year

“[Initially] the state was too optimistic about how the implementation of legalization was going to work. This governor has paid attention to that.” — Josh Drayton of the California Cannabis Industry Association
Industry experts say the diminished tax income reflects a somber reality: Most consumers are continuing to purchase pot in the illegal marketplace, where they avoid taxes that can near 50 percent in some communities.Tax collections are expected to gradually increase over time, but predicting what that amount will be remains something of a guess.
Tax collections for “a newly created market are subject to significant uncertainty,” the budget said.
Josh Drayton of the California Cannabis Industry Association credited Newsom with taking “a realistic look at the challenges” after a bumpy first year of broad legal sales.
Newsom also recommended a sharp increase in spending for regulatory programs, although it’s an open question whether it will be enough to help steady the state pot economy.
The budget recommends just over $200 million for marijuana-related activities in the fiscal year that starts July 1, which would be over a 50 percent boost from the current year.
Initially “the state was too optimistic about how the implementation of legalization was going to work. This governor has paid attention to that,” Drayton said.
That said, Drayton added that legal businesses need a break from hefty tax rates that are driving consumers to the illicit economy. Various proposals have been made to cut state pot taxes.

Newsom Is an Advocate for Legalized Marijuana

State taxes include a 15 percent levy on purchases of all cannabis and cannabis products, including medical pot. Local governments are free to slap on taxes on sales and growing too, which has created a confusing patchwork of tax rates around the state.
The state’s top marijuana regulator, Lori Ajax, has said the state intends to get more businesses licensed and operating in 2019, while cracking down on rogue operators who continue to proliferate across the state.

Newsom, an advocate for legalized marijuana, said it has long been expected the new market would take five to seven years to settle in, with twists and turns along the way.
At year’s end, California’s effort to transform its longstanding illegal and medicinal marijuana markets into a unified, multibillion-dollar industry remained a work in progress. By some estimates, up to 80 percent of sales in the state remain under the table, snatching profits from legal storefronts.
Drayton said more than half the municipalities in the state do not have laws governing the industry. That means pot businesses cannot locate there, since companies are required to have a local license before seeking one from the state.
The budget also includes an additional $2.9 million for the California Department of Tax and Fee Administration to help chase down tax cheats.
Meanwhile, the courts budget includes nearly $14 million for resentencing of thousands of drug offenders whose offenses are no longer crimes since California legalized recreational pot.
Newsom, an advocate for legalized marijuana, said it has long been expected the new market would take five to seven years to settle in, with twists and turns along the way.
The issues he intends to look at include the distribution pipeline and claims that local governments are gouging the industry.
The state will “move expeditiously at licensing more and more dispensaries, making sure we go after the bad actors,” he said.

DON'T MISS

What Are Fresno Real Estate Experts Predicting for 2025 and Beyond?

DON'T MISS

First California EV Mandates Hit Automakers This Year. Most Are Not Even Close

DON'T MISS

California Senator Will Make Historic Appearance at Fresno City College Commencement

DON'T MISS

Gaza Ceasefire Talks in Cairo Near ‘Significant Breakthrough,’ Two Security Sources Say

DON'T MISS

Fresno County Farmer Sentenced to Prison in $650,000 Crop Insurance Fraud Case

DON'T MISS

Where Were the Most Car Crashes in Clovis? Police Release List

DON'T MISS

Protesters to Rally in Brooklyn After Pro-Israel Crowd Assaults Woman

DON'T MISS

Selma Teen’s Death May Be Tied to Fentanyl, Police Say

DON'T MISS

Blast Kills at Least 26 People in Nigeria’s Northeast, Residents Say

DON'T MISS

5-Year-Old Girl and Parents Among Those Dead in Vehicle Ramming in Vancouver

DON'T MISS

Feds Again Bump Up Water Allocation for Many Fresno County Farmers

DON'T MISS

Levi Strauss Shareholders Vote Against Proposal to End Diversity Programs

UP NEXT

Autopsy Confirms Gene Hackman Died From Heart Disease

UP NEXT

California Faces Automaker Backlash Over 2035 Gas Car Ban

UP NEXT

Trump Says Putin May Not Want Peace and May Need to Be ‘Dealt With Differently’

UP NEXT

Only About Half of Republicans Say Trump Has Focused on the Right Priorities

UP NEXT

Israeli Airstrike Kills 10 People, Half of Them Children

UP NEXT

Shedeur Sanders Is Still Waiting for a Call as the NFL Draft Enters the Final Day

UP NEXT

Israel’s AI Experiments in the War in Gaza Raise Ethical Concerns

UP NEXT

Paul Skenes Strikes Out 9, Wins Duel With Yamamoto in Pirates’ Victory Over Dodgers

UP NEXT

Eovaldi Outlasts Verlander as Rangers Beat Giants

UP NEXT

Rams Take Oregon Tight End Terrance Ferguson in Second Round After Trading Out of First

Where Were the Most Car Crashes in Clovis? Police Release List

9 hours ago

Protesters to Rally in Brooklyn After Pro-Israel Crowd Assaults Woman

10 hours ago

Selma Teen’s Death May Be Tied to Fentanyl, Police Say

10 hours ago

Blast Kills at Least 26 People in Nigeria’s Northeast, Residents Say

10 hours ago

5-Year-Old Girl and Parents Among Those Dead in Vehicle Ramming in Vancouver

11 hours ago

Feds Again Bump Up Water Allocation for Many Fresno County Farmers

11 hours ago

Levi Strauss Shareholders Vote Against Proposal to End Diversity Programs

11 hours ago

US and Mexico Have Reached Agreement on New World Screwworm, Ag Secretary Rollins Says

12 hours ago

Death Toll in Iran’s Bandar Abbas Port Blast Rises to 70

12 hours ago

Selma Mayor Responds to Criminal Charge

13 hours ago

California Senator Will Make Historic Appearance at Fresno City College Commencement

For the first time in Fresno City College’s 115-year history, a United States senator will speak at its commencement ceremony. California De...

9 hours ago

9 hours ago

California Senator Will Make Historic Appearance at Fresno City College Commencement

Palestinians gather at the site of an Israeli strike on a house, in Jabalia, in the northern Gaza Strip April 28, 2025. (REUTERS/Mahmoud Issa)
9 hours ago

Gaza Ceasefire Talks in Cairo Near ‘Significant Breakthrough,’ Two Security Sources Say

9 hours ago

Fresno County Farmer Sentenced to Prison in $650,000 Crop Insurance Fraud Case

9 hours ago

Where Were the Most Car Crashes in Clovis? Police Release List

Officers with the New York Police Department outside the Chabad Lubavitch World Headquarters in the Crown Heights neighborhood of Brooklyn, on Monday, April 28, 2025. The Police Department said it was preparing for new protests in Brooklyn on Monday after a woman was verbally and physically assaulted by hundreds of pro-Israel demonstrators there last week. (Victor J. Blue/The New York Times)
10 hours ago

Protesters to Rally in Brooklyn After Pro-Israel Crowd Assaults Woman

10 hours ago

Selma Teen’s Death May Be Tied to Fentanyl, Police Say

At least 26 people were killed and three injured on Monday when two vehicles struck an improvised explosive device in Nigeria’s insurgency-hit Borno state, an attack residents blamed on Boko Haram. (Shutterstock)
10 hours ago

Blast Kills at Least 26 People in Nigeria’s Northeast, Residents Say

Visitors pay their respects at a memorial after a vehicle drove into a crowd during a Filipino heritage festival in Vancouver, British Columbia, Sunday, April 27, 2025. (AP/Lindsey Wasson)
11 hours ago

5-Year-Old Girl and Parents Among Those Dead in Vehicle Ramming in Vancouver

Help continue the work that gets you the news that matters most.

Search

Send this to a friend