Why is the world’s largest cannabis market shooting itself in the foot?

The cannabis industry is approaching a point of no return. With prohibition ending, the sector will have to figure out how best to capitalize on its newfound freedom and maintain positive public sentiment around marijuana in order for it to thrive past this tipping point.

The “what is the largest market in the world” is a question that has been posed to me on many occasions. The answer is that the world’s largest cannabis market is shooting itself in the foot.

Why is the world's largest cannabis market shooting itself in the foot?



California’s taxes are among the highest in the nation, and that includes cannabis-related levies that are so expensive that they are stifling what should be the country’s – if not the world’s – biggest and most promising cannabis industry. (Benzinga)

According to a new study conducted by Reason Foundation, Good Farmers Great Neighbors, and Precision Advocacy, high taxes and onerous regulations are keeping unlicensed cultivators out of the legal market and contributing to illicit sales, which now account for three-quarters of all weed sales in California.

A 15 percent excise tax, as well as local cultivation, manufacture, processing, distribution, and retail taxes, are added to the $161 per pound flat charge. As a consequence, California collected approximately $1 billion in cannabis tax income in the first three quarters of 2021, despite the fact that the cannabis business is in free fall. 

The cultivation tax must be abolished.

According to Geoffrey Lawrence, director of drug policy at Reason Foundation, “high taxes are hurting California’s legal cannabis industry.”

“By reducing the cultivation tax, California may treble monthly cannabis tax receipts by 2024. Lower cannabis pricing would enhance sales of legal items without the cultivation tax, increasing the state government’s general sales tax collection and more than compensating for the cultivation tax’s loss.”

The market has been stifled. 

California’s legal cannabis industry has not even come close to fulfilling its size predictions due to hefty taxation. Indeed, despite its population of about 40 million people and high adult cannabis usage rates, the industry is just one-third the size projected. 

That is, the report predicts that roughly two-thirds of cannabis purchases in California still take place on the black market.

Taxes on marijuana in comparison to adjacent states

State and municipal taxes on legal cannabis in California may reach $90 per ounce, or $1,441 per pound. Cannabis taxes in Oregon are $340 per pound and $526 per pound in Colorado.

Residents in Oregon spend 378 percent more per capita on legal cannabis as a result of cheaper taxation and more availability to legal goods. According to the survey, Colorado citizens spend 335 percent more per capita on legal cannabis than Californians.

“We are seeing firsthand how the illegal market, high taxes and fees, and a patchwork of inconsistent local taxes are driving legal operators to the edge of a financial cliff,” said Amy O’Gorman Jenkins, president of Precision Advocacy and legislative advocate for the California Cannabis Industry Association.

“We cannot allow the world’s biggest cannabis industry to collapse.”

Farmers confront the most difficult challenges, and some have given up.

“This year, several farmers are contemplating going fallow. Busy Bee Organics, one of Santa Barbara’s first woman-owned, sun-grown farms, has already announced that she would not be planting this year “Good Farmers Great Neighbors policy director Sam Rodriguez stated. 

What to do if there are no farmers and no weed?

“Removing the cultivation tax as soon as possible would be a first step toward resolving fundamental challenges affecting the state’s legal cannabis industry from seed to sale,” Rodriguez added.

Another startling figure

Oregon (population 4.2 million) boasts one legal cannabis store per 6,145 persons (some argue the world’s highest per capita!). According to the report, Colorado (population 5.8 million) has one legal cannabis store for every 13,838 inhabitants, whereas California has just one legal cannabis retailer for every 29,292 persons.

Maureen Meehan’s contribution

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