Licenses, not taxes, are the main problem in California

I was disappointed to see the usually reliable Tax Policy Center repeat the message of the cannabis industry and the libertarian right, saying that “high taxes” on marijuana in California are to blame for slowing revenue growth.

Today’s TPC newsletter,, has this: “Revenue growth slowed in the last quarter of 2018 in part because of the state’s high taxes, local bans, and a growing black market for recreational marijuana.”

Local bans, yes – that gets to the point.  The real problem in California is a severe and crippling lack of licensed sellers.

That article, by David Downs, points out not only have not enough licenses been issued, but “Temporary licenses have started expiring.”  And “The rate of temporary license expiration is accelerating.”

My reaction:  Taxes can be blamed for illegal cannabis market during a crippling license shortage ONLY if

  1. Taxes eliminate the pool of people applying for licenses – that is, if the prospect of high taxes discourages so many people from applying for licenses that the licensing authority has no remaining applications to consider,


  1. Tax-averse applicants are so clearly superior to the existing pool that licensing would come quicker for them.

Am I missing something?

Here’s more on the license crisis:

“the three main state cannabis licensing agencies—the Bureau of Cannabis Control (“BCC”), California Department of Public Health (“CDPH”), and California Department of Food and Agriculture (“CDFA”)—and localities which issue permits to cannabis operators, were all backlogged with numerous applications and couldn’t process all of the applications in time for applicants to get operational in 2018. In some cases, applicants could not even obtain temporary licenses before the temporary license regime expired.”


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