California’s craft cannabis industry is ‘on the brink of collapse,’ advocates say

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LOS ANGELES — Cannabis advocates, small farmers and business owners on Thursday called for an overhaul of California’s marijuana tax system as they struggle to stay afloat amid rising drug costs. operation and regulation.

They gathered outside the State Capitol in Sacramento to make their case and warn that the industry could collapse if action is not taken soon.

“We are here today because the craft cannabis industry here in California is in crisis and on the verge of collapse,” said Amber Senter, co-founder and executive director of Supernova Women, a nonprofit organization that strives to create opportunities for people of color in the industry.

“Not only has the state failed to deliver on its promises to right the wrongs inflicted on black and brown communities affected by the war on drugs, but it has also perpetuated regressive policies of drug war 2.0 through oppressive taxation, which must end,” Senter said in a statement. “This is our cry and our cry for help.”

Senter and others are calling on the Legislature and Governor Gavin Newsom to eliminate the grow tax and repeal the state excise tax for social equity retailers.

Thursday’s rally built on the momentum created by industry leaders also demanding that California change the way it taxes cannabis. Marijuana companies warned Newsom in a letter last month that immediate tax cuts and rapid expansion of retail outlets were needed to stabilize an increasingly volatile market rocked by illicit dealers and growers. .

More than two dozen cannabis executives and legalization advocates signed the letter after years of complaints that the heavily taxed industry is unable to compete with the widespread illegal economy, which offers much lower consumer prices. and double or triple legal market sales.

Proposition 64, which voters approved in 2016 and legalized cannabis, “was not passed simply to increase tax revenue, but to end the illicit market, protect public health and safety, and create a legal industry.” accountable,” the executives said in the letter. “Yet today, four years after legal sales began, our industry is collapsing and our global leadership and legacy is on the verge of being lost forever.

“The opportunity to create a robust legal market has been squandered due to excessive taxation,” they continued. “75% of cannabis in California is consumed in the illicit market and is untested and unsafe.”

The state tax system has weighed on small businesses from the start, operators and experts say. Effective January 1, cannabis is taxed at a flat rate of approximately $161 per pound, in addition to a 15% excise tax, as well as local taxes on cultivation, manufacturing, processing, distribution and retail.

Newsom, who supported Proposition 64 as lieutenant governor, signaled this week that help may be on the way. Unveiling his 2022-23 budget proposal on Monday, he said he supports cannabis tax reform and plans to work with the Legislature to change the policy.

“My goal is to look at tax policy to stabilize the market,” he said. “At the same time, it is also my goal to make these municipalities aware of the opportunities to get rid of the illegal market, the illicit market, and to provide support within a regulatory framework for the legal market.”

Assemblywoman Mia Bonta, a Democrat who represents the East San Francisco Bay Area, said at Thursday’s rally that cannabis regulatory reform is about ensuring social justice, l fairness and representation in an industry that has been dominated for years by white men but has mostly done harm. Blacks and Latinos.

Several cannabis businesses in the Bonta District were robbed at gunpoint in November, losing an estimated $5 million in the days leading up to Thanksgiving. Henry Alston, co-founder and chief operating officer of James Henry SF, a cannabis company in Oakland, said his businesses were robbed five times in the series of robberies.

“They took everything,” he said. “They dragged our safe with our tax money right outside the front door.”

Casey O’Neill, owner and operator of Happy Day Farms in Mendocino County, said he experienced the drug war firsthand as an inherited grower who learned the trade from his parents. In 1985, law enforcement officers “stormed our house for 30 plants”, forcing his family to flee for safety, he said.

“My pregnant mother escaped with me and my brother into the creek bed to the north,” O’Neill said. “The trauma of that day formed some of my earliest memories.”

More than 30 years later, O’Neill sees parallels between California’s highly regulated cannabis market and the prohibitionist attitudes of his youth. High taxes, he said, prevent smaller operators from joining the industry and exclude communities hardest hit by the war on drugs.

“The system is not working,” he said. “Unfair taxation spells the end of the dream of so many people.”

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