Democrats and Republicans in Sacramento finally agree on something — high taxes and over regulation are killing business.
You might be asking yourself what are they smoking? Try marijuana.
There is a move afoot backed by members of both parties to reduce the state excise tax on pot from the voter approved 15 percent down to 11 percent and suspend the $148 per pound cultivation tax for three years.
It’s because only a very few growers are going the legal route. The California Growers Association reports as of February not even 1% of the Golden State’s 68,150 known marijuana cultivators have obtained licenses.
They blame it on bureaucratic red tape and regulation on top of regulation plus California taxing legitimate businesses to the fifth dimension.
Let’s start with lie No. 1 that the majority of Californians inhaled in voting for Proposition 64 that legalizing pot would raise $1 billion a year. Governor Jerry Brown thought that was a bit too optimistic and inserted the figure of $643 million into the state budget for the upcoming fiscal year starting July 1.
If the pot growers are correct, $100 million may be wildly optimistic.
Fitch, a credit rating agency that rates the financial health of institutions including government agencies, puts the effective tax rate on legally grown marijuana in California at 45 percent. That’s because after you take the state excise tax and the cultivation tax there’s a sales tax that can run as high as 9.2 percent.
Now for lie No. 2 that marijuana is no different than alcohol.
There might be an argument for that point in terms of consuming both items but there is a big difference between booze and pot.
Prior to 1919 taxes on alcohol accounted for 30 to 40 percent of the federal budget. Federal revenue agent positions were not created to enforce health standards breaking up illegal stills. They were put in place way before 1919 to make sure anybody who made booze paid the $1.10 per gallon excise tax. Among of the biggest proponents of the income tax were backers that wanted to implement Prohibition. They needed a source of revenue for the federal government to get support to ban booze. Just like today, no self-respecting politician after the turn of the 20th century is about to cut taxes without finding a way to not just replace lost revenue but to generate even more.
It wasn’t just a coincidence Prohibition was repealed in 1933 when we in in the throes of the Great Recession. The booze tax was set at $2 in 1933.
Unlike booze marijuana was never taxed before California became the second state to ban it in 1913 two years after Massachusetts became the first to do so. The federal government didn’t get around to outlawing it until 1937.
The bottom line is people were used to paying higher prices for booze. Bootleggers did not lower the price during Prohibition as those that drank were used to the $1.10 per gallon price being absorbed into the price of a drink. That is not the case with pot.
Lie No. 3 was the argument most growers would jump at the chance to be legitimate.
Calaveras County proved the fallacy of that assumption. It was one of the few counties that allowed legal commercial medical marijuana grows. Then hundreds of illegal grows popped up with the approach of legalization that brought crime, water and soil pollution, and other woes.
Growers also whine they have to answer to no less than six state agencies to try and get a permit. You won’t see very many dairy farmers, other agricultural operations, or businesses shed too many tears over the plight of the struggling pot grower who also has a nasty tendency to skirt compliance with state labor laws.
Then there is a fear the soon to be imposed $1,000 state licensing fee will be too high of a barrier for a mom and pop grower to go legit.
But then again to be a barber you need 1,500 hours of classes in California, plus pass an exam and pay $50 for a license every two years to make sure the public’s health and safety is protected.
Which brings us to Lie No. 4: Legalizing marijuana would reduce environmental damage on watersheds. At least barbers have to demonstrate a proficiency in best practices. All the state wants is the money with pot growers.
Environmentalists that promoted legalized marijuana as a way to stop pot growers from poisoning the soil, killing off critters as collateral damage to protect their plants from disease and bugs, plus end toxic pollution of streams from fertilizers must feel pretty good the passage of Proposition 64 unleashed a torrent of even more growers that aren’t monitored by the state. It’s ironic after years of slamming farmers for not being environmentalists even though almost all are good stewards of the land or else they’d be out of business in a few growing cycles, environmentalists supporting the legalization of pot have helped set in motion moves that are likely increasing pollution significantly.
And now for the whooper — lie No. 5: Legalizing marijuana will reduce the black market and the baggage it comes with.
Just who do you think is benefiting from the surge in pot demand now that it has been decriminalized? It is doubtful those among the 39.8 million Californians who smoke pot are buying it from proprietors who are only supplied by 60 legally licensed marijuana growers out of 68,150 plus cultivators.
This column is the opinion of Dennis Wyatt, and does not necessarily represent the opinion of The Journal or Morris Newspaper Corp. of CA. He can be contacted at email@example.com or 209.249.3519.