California Analysts Propose Taxing Cannabis Based on Potency

If you find yourself in California in search of a particularly strong strain of bud, it may soon cost you. 

That’s because analysts in the state this week recommended replacing the existing tax structure for marijuana products, and replacing it with one tied to the potency of the cannabis.

The Stronger The Weed, The Higher The Price Tag 

The proposal, which was offered up on Tuesday by the California Legislative Analyst’s Office, comes amid criticism from lawmakers and advocates over the established tax policy for legal weed, which the Associated Press reported can be as high as 50 percent in certain markets. 

The Legislative Analyst’s Office said it analyzed four different types of taxes, ultimately finding that weight-based taxation performed “similarly to or worse than the potency‑based tax” based on three primary criteria that informed the study: effectiveness at reducing harmful use, revenue stability and ease of administration and compliance.

“We view reducing harmful use as the most compelling reason to levy an excise tax,” the analysts said in their recommendation. “Accordingly, we recommend that the Legislature replace the existing retail excise tax and cultivation tax with a potency‑based or tiered ad valorem tax, as these taxes could reduce harmful use more effectively. If policymakers value ease of administration and compliance more highly than reducing harmful use, however, the Legislature might prefer to keep the existing retail excise tax. In contrast, we see little reason for the Legislature to retain the weight‑based cultivation tax.”

As part of the recommendation, the analysts urged California lawmakers to “specify the details of the tax structure in consultation with scientific experts,” saying that available information suggests that “a potency‑based tax in the range of $0.006 to $0.009 per milligram of THC could be appropriate.” 

“If the Legislature prioritizes reducing the illicit market, it may prefer a rate closer to the lower end of this range,” the analysts wrote. “If, on the other hand, it prioritizes raising revenues, it may prefer a rate closer to the higher end.”

The report continued: “If the Legislature decides not to adopt a potency‑based or tiered ad valorem cannabis tax, we nevertheless recommend that the Legislature eliminate the cultivation tax. In this case, we recommend that the Legislature set the retail excise tax rate somewhere in the range of 15 percent to 20 percent depending on its policy preferences.” 

The proposal was greeted positively by the California Cannabis Industry Association.

“As California’s regulated market struggles against a thriving illicit industry, we believe that comprehensive tax reform will incentivize consumers to purchase regulated cannabis products, ease administration and compliance, and increase and stabilize revenues for the state,” the group said, as quoted by the Associated Press.
The post California Analysts Propose Taxing Cannabis Based on Potency appeared first on High Times.

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