California News

Editorial: High taxes help protect the black market for marijuana

About one out of every five of California’s marijuana consumers is still sticking with the black market, a report published by the San Francisco-based marijuana company Eaze recently noted.

One of the major reasons they cite is California’s high rate of taxes on the burgeoning legal market for marijuana and marijuana products.

Another practical reason is the lack of legal options in many communities. As of April, only about one of seven California cities permitted the legal sale of marijuana.

High prices are another factor keeping many away from the legal market. About a third of marijuana consumers surveyed by Ease cited this as a common experience.

“Simply stated, California has done a good job of telling consumers that cannabis is legal but has a long way to go in making it easy to get safe, legal and affordable cannabis,” the report concluded.

The full benefits of marijuana legalization in California cannot be realized so long as governments suffocate the legal market.

Fortunately, tackling the problems of high taxes, high costs and lack of availability are largely solvable issues, so long as politicians and the public alike recognize the importance of bringing the marijuana industry above ground.

On the tax front, local governments must be careful not to load on additional taxes.

Eaze noted that a 5 percent reduction in tax rates on marijuana “could drive 23 percent of illicit market supporters into the legal market.”

In contrast, a 5 percent increase could drive up to a third of legal customers back to the black market.

If those results from customers surveyed by Eaze hold true, it should encourage governments to hold off on higher taxes and perhaps even lower them in order to encourage more people to participate in the safe, legal market.

The high prices are likely to ease so long as the legal market is able to grow. Key to this is continuing to engage with cultivators and other participants in the market in order to better balance regulations and restrictions.

While not every California city is likely to allow legal operations, more should. If we’ve learned anything from alcohol and marijuana prohibition, it’s that it merely drives markets underground and does more harm than good.