California Pulls a California on Legal Marijuana

California plays strongly to type by legalizing recreational weed but putting outrageous taxes on it.

When I write an everything-you-need-to-know column, it’s not because I’m under any illusions that I’ve actually amassed all the information one could need on a topic. Instead, it’s just a meme.

Today’s column belongs in the latter category. Could there possibly be something that more perfectly captures the essence of California than a story about the over-taxation of legal marijuana?

Marijuana dispensaries across California experienced long lines on the first day of legal recreational pot sales. But advocates warned the legal industry won’t survive without big changes…said Steve DeAngelo, co-founder and CEO of Harborside in Oakland. “At the same time, I’m terrified about what’s going to happen with these taxes.” Harborside has been a medical marijuana dispensary for more than a decade, and is now selling recreational marijuana… “In our shop here, the tax rate has gone from 15 percent all the way up to almost 35 percent for adult consumers,” DeAngelo said. …There is the regular state sales tax of 6 percent, and the regular Alameda County sales tax of 3.25 percent. Then there is a 15 percent state tax on marijuana, and a 10 percent Oakland tax on recreational marijuana. Total taxes: 34.25 percent. …In addition to taxes, marijuana regulations drive up the cost.

Excessive government and lifestyle liberalism. A perfect summation of California.

By the way, even though I’m a social conservative-style teetotaler, I agree with the pot legalization. But I have mixed feelings because I don’t want politicians to get more money to waste, though I am happy that people have the option to still use the underground economy.

…”a significant number of people, less affluent consumers, are going to turn to the lower prices of the underground market,” DeAngelo said. …People who are disabled or on fixed incomes may turn to the black market. “They can barely afford cannabis now, much less with a 35 or 40 percent tax increase,” DeAngelo said. When people aren’t buying from a regulated business, the state is getting zero taxes.

This is yet another example of the Laffer Curve, which is simply the common-sense notion that marginal tax rates impact incentives.

When taxes are too high, there’s either less taxable activity or the activity moves where the government can’t tax it. In other words, higher tax rates don’t necessarily mean higher tax revenue. And it definitely means revenues will never be as high as the pro-tax crowd would like.

Such a simple concept that even some leftists are catching on.

This may lead California to lower tax rates, as has happened in other states.

Colorado, Washington state and Oregon each legalized marijuana at one tax rate and then had to lower the rate to keep people in the legitimate market. DeAngelo believes California will have to do the same. “I don’t think that the current tax rate for cannabis in California is sustainable,” he said.

That last sentence puts me in a good mood. I very much like when greedy politicians are forced to lower tax rates.

For those who want a more detailed and serious look at the economics of taxation and drug prohibition, this column from last November is a good place to start.

And for those who want a closer look at the moral/practical issues of drug prohibition, I recommend this piece from last May.

Reprinted from International Liberty

More by Daniel J. Mitchell

{{article.Title}}

{{article.BodyText}}