Legal Marijuana A Cash Cow For Revenue Hungry California |
Posted: June 14, 2018 |
The prohibition of marijuana came to an end in California on January 1. As legal dealers set up shops and began to ramp up sales, industry observers project billions of dollars in revenue will flow both into the pockets or private entrepreneurs and the tax coffers of the state.
BILLIONS IN NEW REVENUEThe Colorado-based cannabis research firm BDS Analytics projects sales of marijuana will top $3.7 billion in California by the end of 2018. By the end of the next year the estimate is $5.1 billion -- which will be enough to eclipse the revenue generated by the sale of beer which was $5 billion in 2017. California will enjoy a tax windfall from the sale of it’s newest legal recreational drug. BDS Analytics forecasts California will collect some $1.7 billion in tax revenue by 2021.
PROFITABLE FIRST THREE MONTHSThe California tax agency reports the state took in $60.9 million in the first three months of 2018. It harvests tax from the state’s newest green legal product in three ways. So far: * $32 million came from an excise tax California adds on top of every state and local tax of legal recreational marijuana. * $27.3 million from state sales tax. * $1.6 million from a cultivation tax paid by growers. An excise tax is a common feature in California. It also applies it to sales of alcohol and tobacco products, and now also Cannabis Dispensaries and Marijuana & Cannabis Delivery Services. User of medical marijuana are exempt from state and local taxes if they have a valid Medical Marijuana ID card, but they still must pay the excise tax.
SKY HIGH 'SIN TAX'By comparison, the California tax on marijuana is almost three times higher than the “sin tax” on alcohol. In 2015, for example, California collected just under $36 million on sales of wine and beer combined, according to the California State Board of Equalization. Another way of looking at is that California will collect 35 cents for every $1 of pot sold. Alcohol taxes amount to about ten cents on the dollar.
STICKER SHOCKThe high taxation rate has created more than a bit of controversy -- in fact, it has engendered feeling of “outrage and confusion,” reported The Cannifornian, a publication which covers the cannabis industry. Critics say California’s bureaucrats move to cash-in big time on pot sales will only drive users into the arms of the black market while stifling the legal recreational marijuana industry. The excise tax is the key factor. Consider the comparison of the excise tax on marijuana compared to alcoholic beverages: * Cannabis -- 15% * Wine -- .25% * Beer -- 1.5% On the other hand, the excise tax on tobacco is an enormous 60% However, the difference in the marijuana tax from alcohol is that the former is a percentage of dollars sold, while the latter is a flat tax on a commodity amount. Wine and beer get charged 20 cents per gallon. A pack of cigarettes is tagged with $2.87. Pot is taxed on a percentage of the purchase price.
CASH HUNGRY CALIFORNIABut it’s clear that in revenue-starved California, lawmakers are counting of stiff cannabis taxes to alleviate this state’s projected budget deficit of $1.6 billion. California’s local and state budget debt is an enormous $1.5 trillion, reports the California Policy Center.
|
||||||||||||||||||||||||||||||||||||||||||
|