 California’s Cannabis Industry is suffering in a big way. Businesses involved in the industry have been hemorrhaging money for the last year, to the point where far too many are now on the brink of closing. Jerred Kiloh, who heads the United Cannabis Business Association, a Los Angeles-based trade group, notes that “No one is making money anywhere in the (legal) supply chain.”
When marijuana was legalized, hopes were that it would bring gold to the Golden state, and it has. The state has collected $3.12 billion in marijuana tax revenue in the three years since legal sales began. The state has enjoyed using this windfall, with tax revenue benefiting scores of people through state programs. But people in the industry throughout the great state say things are at a breaking point for many of them, if not most of them. Crop yields aren’t selling for what they used to. Prices have been plummeting for the last year, with some crops going for as much as 70% less than previously. And while crops are selling for less and less, taxes are pushing higher and higher. Without some relief soon, all of this will have a devastating effect on everyone in the state, through loss of jobs, loss of tax revenue, and all the dangers that come with a flourishing black market instead of a sustainable legal one. Cannabis jobs have been growing fast, but they are at risk due to this crisis. Leafly’s 6th annual Cannabis Industry Jobs Report for 2021, which was created in partnership with Whitney Economics, found that the legal cannabis industry was responsible for an incredible 428,000 jobs last year. Leafly CEO Yoko Miyashita said “, the industry has created hundreds of thousands of new American jobs – and there are still plenty more yet to be created.” Without some relief, companies will be forced to continue to cut costs, reduce operations, or go out of business altogether. This puts thousands of industry workers out of jobs. A loss of cannabis businesses also means a loss in tax revenue for the state. Dr. Lynn Silver, the Oakland-based Public Health Institute program manager, says, “We need every cent of cannabis revenue .” California Cannabis Industry Association Executive Director Lindsay Robinson agreed, calling the funding youth organizations get as “extremely important” and adding, “We know how vital these funds are. But when the legal businesses fail, the funding will dry up,” she said. Another downside that comes with failing to truly support the legal cannabis industry is that the black market sales increase. People will always find a way to get what they need. An unregulated black market not only doesn’t provide tax revenue for the state, but instead, it costs the state money as it deals with all the crime elements associated with an illegal black market. It’s better for everyone in the state if these sales take place legally. At this time, though, with taxation being too high to sustain businesses and too few locations to sell products legally, estimates are that the black market sales are nearly twice those of legal sales. That’s a lot of tax loss for the state, a lot of illegal activity, and a lot of hard-working people behind that weed who would genuinely like to operate safely, legally, and sustainably. So what’s the answer? In the simplest terms: lower the taxes and allow more dispensaries. The current taxation system is clearly too high. There is no other business taxed as heavily, including alcohol. And it’s easy to see that too many companies cannot make it work. Only venture capital-backed companies can afford to operate at a loss, which even they will only be able to do for a limited amount of time. Opening more dispensaries will allow more vendors to get their products into legal storefronts, instead of the flourishing black market sales taking place now. As of January, there were 866 licensed dispensary locations in a state of nearly 40 million people! That’s a rate of 40,000 people for every brick-and-mortar dispensary. The Center for Disease Control says that 18% of Americans use illegal marijuana, which means that there are 7,200 people using marijuana for every one legal dispensary. That would be one crowded dispo! Clearly, many people are utilizing the black market, and clearly, more storefronts are needed to keep things legal. Localities that ban legal marijuana sales do nothing to limit residents’ access to cannabis. Instead, they are only limiting their access to legal sources. In the relatively few localities that allow a regulated cannabis marketplace, sales transactions occur legally and safely for all. Businesses have a location to sell their products. Consumers benefit by making purchases that are lab-tested for quality assurance and where they can feel safe thanks to security measures in place. And the state benefits by receiving more tax revenue (despite lowering overall taxes, having the current black market turn legal would increase the tax revenue generated for the state). CannaCraft, a large distributor/manufacturer, Chief of Government & Consumer Affairs, Tiffany Devitt, said, “We went from a market where the system made it so difficult for cultivators to join the legal market that we didn’t have enough supply and prices were extremely high through 2019 and 2020. Today, we have a lot more supply, but retail growth isn’t there because the majority of jurisdictions have banned retail.” Devitt also points out that this problem compounds problems for the industry, saying, “More flower going into the same size market is driving prices down, and that’s devastating California’s cannabis industry.” (source Leafly) Recently some senators and child advocacy groups have asked the governor not to lower taxes on cannabis. Their views do not consider the long-term effects it will have, though, on jobs, the black market, and even the tax revenue generated that they so desperately want to keep. One must question if this is fueled by the organizations or the beneficiaries of these. Surely after examining all the facts, they would see that more money would come to the state and these charities if more cannabis businesses could go legal. Localities that choose to keep out the marijuana marketplace are fooling themselves. It’s still there and thriving. It’s time for more counties and cities across the state to realize that they all still have a cannabis market in their location, just not the kind that benefits them. It’s time for them to see that legalizing will benefit them tremendously and keep less unsavory illegal elements at bay. Now is the time for California to help the Cannabis business so that it can help the whole state. Lowering taxes will allow more cannabis businesses to afford to enter into and sustain their operations, which keeps and creates more jobs, and generates more tax revenue overall as the illegal operations can afford to go legal and contribute their taxes, too. And having more locations where dispensaries can open legally also allows those cannabis suppliers to have a place where they can keep their sales in the legal market. Let’s keep the gold in the golden state by supporting the Cannabis Industry. Catherine Cole/The M News Comments are closed.
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