California was predicted to become the rockstar state in the realm of legal cannabis, but the recreational pot sales have not quite taken off in the way that many had hoped since the market launched in 2018.
Some believe this lackluster beginning is due to over-regulation, high taxes and the ability of municipalities to bow out of legal sales altogether.
All of this has a more significant percentage of cannabis customers frequenting the black market, which is the exact opposite of the promises made by cannabis advocates back when they were pushing this reform. The fact remains that fewer Californians are buying legal weed than ever, and it is now up to the bumbling powers that be to determine what needs to be done to get everything on track.
Early predictions showed that California would rake in around $1 billion in revenue during the first year of legal sales. Needless to say, the state has fallen short. California is now expected to generate around $471 million — $630 million less than what Governor Jerry Brown projected in his last budget.
This is mostly because the guts of Proposition 64 gave cities the right to ban pot sales in their neck of the woods. Many of them went for it. In fact, only around 20 percent of the cities in California allow marijuana sales in some form or fashion.
In Los Angeles County alone, 82 of its 88 towns still maintain a prohibition standard. Marijuana sales in those places are nonexistent. For example, pot sales are not legal in Compton or Beverly Hills.
Still, pot taxes in those jurisdictions allowing legal sales are compounding the problem by nickel and diming customers to death. There is a 15 percent excise tax, a 10 percent recreational marijuana tax, and a 9.5 percent city tax in Los Angeles. The black market doesn’t operate this way, and possession of the herb is no longer a crime, which makes it easy for citizens to use this illicit outlets without fear of legal repercussions.
Although legal marijuana sales really took off in states like Colorado and Washington after the market was launched, California’s market was already pretty much wide open before voters approved Proposition 64 back in 2016. There is so much marijuana being manufactured in the Golden State (15.5 million pounds) that the state now has far more surplus than it actually consumes (2.5 million pounds). Considering the state’s licensing problem – not even close to the 6,000 projected licensed cannabis shops — the black market is just stronger than the legal trade has been allowed to become.
Illegal operations have and are still taking full advantage of this situation, according to Tom Adams of cannabis market analysts BDS Analytics. “Regulators ignored that and thought they could go straight into an incredibly strict and high-tax environment,” he told the New York Times.
A lot of the weed being produced in California is being smuggled eastward to supply the black market in areas of prohibition. It’s been that way for years.
“It’s a very serious issue,” Governor Gavin Newsom said back in 2016 when he was serving as Brown’s lieutenant, “and it’s going to create a dynamic where the black market will likely persist in a very stubborn way.”
Although there is hope the market will eventually work itself out, cannabis advocates say it is not possible without a total revamp of the law.
“The cannabis industry is being choked by California’s penchant for over-regulation,” Dale Gieringer, director of California NORML, told the Los Angeles Times. “It’s impossible to solve all of the problems without a drastic rewrite of the law, which is not in the cards for the foreseeable future.”