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California lawmakers now consider tax cut to curb black market growth

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With marijuana use being legalized in the states, California will soon cut down taxes aiding the growth of cheaply available marijuana. The lawmakers in California announced that the state government will soon pass a temporary bill for the reduction or elimination of two taxes on Cannabis growth which will help fertilize new and legal marijuana industry. This move was initiated given the troublesome competition from the operators in the black market.

According to the bill, the state currently charges a 15 percent excise tax for cannabis that shall be reduced by 4 percent to 11 percent. Also, there shall be an elimination of the cultivation tax being paid by growers for a term of three years as of now. The bill, dubbed Assembly Bill 286, will soon come into play. As stated by Rob Bonta, the assemblyman for D-Alameda stated that even with the best protocol for business, the marijuana cultivators are unable to compete in the black market due to the cost and price.

People that purchase cannabis from the licensed stores located in California mostly face taxes equivalent to the 45 percent cost of the purchases. Apart from cultivation and excise tax, the local governments at times implement their self-made taxes for use of marijuana. Tom Lackey, the assemblyman for R-Palmdale also speaks in support of the bill. He mentioned that the overall state revenue acquired from the taxes on cannabis reached the $100 million mark but was way below the projection mentioned by the office of Jerry Brown last year. The state acquired about $84 million in revenue during the fiscal year of 2017-18. It also projects an overall benefit of $355 million for the year 2018-19 followed by $514 million for the year 2019-20.

Despite the legalization of cannabis, the black market continues thriving in the state. The CHP last year seized around 8 tons cannabis between the months of January & November. This is nearly 2 times the overall amount that was seized in the year 2017 and highest seized after the calendar year 2014. Currently, the illegal cannabis market has been dominating the cannabis industry while evading taxes & making the community less safe.

Fiona Ma, a state treasurer and co-sponsor of the bill mentioned that her office acquired information from cannabis industry members that the 15% excise duty is actually too high a tax amount to be paid. It’s like taxing start-ups which is something that shouldn’t be done if proper growth is needed for the cannabis industry in a legal way.

Ivan writes about Cannabis at The Cannabis Radar. He has a degree in Nutrition Sciences from University of Oklahoma Health Sciences Centre. He likes to spend his spare time reading to his daughter or spending time with his wife.

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