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

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

DON'T MISS

Pence Will Receive the Profile in Courage Award From the JFK Library for His Actions on Jan. 6

DON'T MISS

Politics Turns Ugly for a Conservative Running for Fresno State Student Body President

DON'T MISS

Pentagon’s Watchdog to Review Hegseth’s Use of Signal App to Convey Plans for Houthi Strike

DON'T MISS

President Trump’s Tariffs Could Be the Political Tipping Point

DON'T MISS

Order That Kept Water in the Kern River Reversed by 5th District Court of Appeal

DON'T MISS

As Dem Candidates for Governor Increase, They Wait for Harris to Decide

DON'T MISS

No More Calling ‘Shotgun?’ CA Could Ban Teens From Riding in Front Seat

DON'T MISS

Protests Planned All Over the World Aimed at Donald Trump and Elon Musk

DON'T MISS

Average US Rate on a 30-Year Mortgage Dips to 6.64% for the Second Drop in 2 Weeks

UP NEXT

No More Calling ‘Shotgun?’ CA Could Ban Teens From Riding in Front Seat

UP NEXT

Diehard Baseball Fans in Sacramento Welcome Athletics and Hope They Stay Awhile

UP NEXT

Flores Homers, Matos and Wade Also Go Deep to Help Giants Cap Sweep of Astros

UP NEXT

California’s Schools Chief Has a $200,000 Salary and a Side Gig

UP NEXT

Trump Proposes Tax Deduction for Auto Loan Interest on US-Made Cars

UP NEXT

Western US Sees Sharp Increase in Extreme Weather Impact

UP NEXT

7-Year-Old Girl Was Killed by a Falling Boulder at a Lake Tahoe Ski Resort

UP NEXT

Xavier Becerra Enters 2026 California Governor’s Race

UP NEXT

Inside a $17 Billion Maintenance Backlog Plaguing California’s Universities

UP NEXT

California Lawmakers Reject Bills to Restrict Transgender Youth in School Sports

Pentagon’s Watchdog to Review Hegseth’s Use of Signal App to Convey Plans for Houthi Strike

2 hours ago

President Trump’s Tariffs Could Be the Political Tipping Point

3 hours ago

Order That Kept Water in the Kern River Reversed by 5th District Court of Appeal

3 hours ago

As Dem Candidates for Governor Increase, They Wait for Harris to Decide

3 hours ago

No More Calling ‘Shotgun?’ CA Could Ban Teens From Riding in Front Seat

3 hours ago

Protests Planned All Over the World Aimed at Donald Trump and Elon Musk

4 hours ago

Average US Rate on a 30-Year Mortgage Dips to 6.64% for the Second Drop in 2 Weeks

4 hours ago

Valley Crime Stoppers’ Most Wanted Person of the Day: Christopher Robert Sharkey

4 hours ago

Fresno Man Arrested in Armed Robbery After Search Warrant Executed

4 hours ago

Diehard Baseball Fans in Sacramento Welcome Athletics and Hope They Stay Awhile

5 hours ago

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

California’s effort to have no new gas-powered vehicles sold in the state by 2035 is beginning, and it requires 35% of all 2026 models...

1 hour ago

1 hour ago

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

Vice President Mike Pence hands the electoral certificate from the state of Arizona to Sen. Amy Klobuchar, D-Minn., as he presides over a joint session of Congress as it convenes to count the Electoral College votes cast in November's election, at the Capitol in Washington, Jan. 6, 2021. (AP File)
2 hours ago

Pence Will Receive the Profile in Courage Award From the JFK Library for His Actions on Jan. 6

2 hours ago

Politics Turns Ugly for a Conservative Running for Fresno State Student Body President

U.S. Secretary of Defense Pete Hegseth attends a joint news conference with Japan's Defense Minister Gen Nakatani at the Ministry of Defense in Tokyo Sunday, March 30, 2025. (Kiyoshi Ota/Pool Photo via AP)
2 hours ago

Pentagon’s Watchdog to Review Hegseth’s Use of Signal App to Convey Plans for Houthi Strike

President Donald Trump holds a signed executive order during an event to announce new tariffs in the Rose Garden of the White House, Wednesday, April 2, 2025, in Washington. (AP/Evan Vucci)
3 hours ago

President Trump’s Tariffs Could Be the Political Tipping Point

3 hours ago

Order That Kept Water in the Kern River Reversed by 5th District Court of Appeal

3 hours ago

As Dem Candidates for Governor Increase, They Wait for Harris to Decide

3 hours ago

No More Calling ‘Shotgun?’ CA Could Ban Teens From Riding in Front Seat

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

Search

Send this to a friend