My friend Dr. Dale Gieringer, head of California NORML, writes (and authorizes me to post):
Hi Pat –
The illicit market is going great guns here in CA. While I think the situation is going to right itself in the coming years, it has made me re-think our argument for establishing a flat-rate weight tax. The purpose of that was to prevent the price from collapsing, but we have the opposite problem right now in CA. A major reason for this is that we ignored the cost of regulations. The regulatory system here in CA is particularly burdensome because our state has a habit of imposing maximal health, environmental, and labor regulations. For example, the state is imposing tougher water use, product testing, labeling and tracking, and waste disposal regulations on cannabis than on any other agricultural crop. For a county to legalize commercial cultivation of cannabis, an EIR is required. The addition of distributors as a new layer of licensee has interposed a whole new level of costs and bureaucracy in the industry. And then there is the gamut of local regulations, fees and taxes. I know of no other new industry that has been obliged to adopt equity hiring policies. And then there are the federal banking rules and 280E tax provision.
I could go on and on about the absurd over-regulation of cannabis here. But my take-away point is that regulatory costs are playing as great a role as taxes in over-pricing marijuana. This being so, you were right to recommend a gradual phase-in of taxes. In the short term at least, “legal” marijuana can’t compete with the illegal variety. Until this situation is rectified, a flat-rate tax is unnecessary to prevent a price collapse.
PO: OK, to me, the flat tax is beside the point, and is not hurting – unless legal marijuana is stacking up unsold in inventory. But is it? Producers, distributors, retailers? State-wide or localized? Flower or everything (processed products)? I hear not.
“It’s not stacking up in inventory, it’s in short supply. There’s a shortage of licensees at virtually all levels of the industry.
A Tahoe club that had 180 different products on the shelf last December now has only 36.”
PO: Dale long predicted that California would over-regulate . . .