California Scheming

California has a ploy to prevent the federal government from cracking down on medical cannabis. I think the state’s ploy is ill-considered and far-fetched.

Here’s the ploy:

“Reporting the cultivation tax:

“. . .

“– You are required to enter adult-use ounces separately from medicinal ounces for each category.”

https://cannabis.ca.gov/2018/ 03/13/important-information- for-cannabis-distributors/

Now I think one of the possible advantages of taxing medical cannabis like adult-use is that cultivators don’t have to decide which is which so soon.  Let the market decide, based on demand as time goes on. Otherwise, shortages and gluts will develop, as identical products have been put into a category that proved wrong.

But California has spurned that advantage. Why? Because medical and adult-use cannabis require separate licenses in California? That begs the question.

So I asked California friend Dale Gieringer, head of CANORML, who supplied this answer:

“A sharp distinction between adult use ‘Type A’ and medicinal cannabis ‘Type M’ permits was introduced by Gov. Brown’s trailer bill.  Everyone in the industry agrees that it doesn’t make sense, as you point out.  Only at the final manufacturing level does it make sense to separate type A [Adult] and type M [Medical].  Plants in the field should be able to enter whichever side of the production stream they are in economic demand.  I understand the distinction was justified on the theory that a rigid separation of medical from adult-use might help protect the former in the event of a federal attack.”

Honestly, I can’t imagine that having cultivators separating medical cannabis from recreational will keep a federal government that cracks down on recreational immobilized for medical. Will the federal government really go into cultivation facilities and confiscate the stuff marked A for adult while winking at the stuff marked M for medical? Anything can happen, I suppose, but I don’t think that will. That implausible benefit comes at a significant cost of inefficiency – at a time when the black market is still entrenched.

One of the reasons Oregon retreated from its voter-passed marijuana law was a desire to exempt medical cannabis from a producer-level tax:  “Another factor [in the Oregon retreat] was the awkwardness of exempting medical marijuana from a production tax. It’s awkward for raw product to be designated irrevocably as medical or recreational, because the market may demand more or less of each category later on, when the consumer sale occurs. And irrevocable designation is not just a guess, it’s a bother.” https://newrevenue.org/2016/02/09/4518/.  California is willing to tax medical and adult-use the same.  I think that’s wise.  https://newrevenue.org/2015/10/19/taxation-of-medical-cannabis-after-legalization/.

Because I’m interested in taxing marijuana, the industry looks askance at me; at least this once I am on their side. Several moves California has made have disappointed me (like the uncorrected $50 million drafting error in Proposition 64) or confused me (like the artificial base for the easily determinable 15 percent retail tax). This early separation into A and M categories is another head-scratcher.

 

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