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California Tax Board Says Regulating Commercial Pot Sales Would Yield $1.4 Billion Annually — Also Predicts Decline in Use of Booze and Tobacco

  • by Paul Armentano, NORML Deputy Director July 16, 2009

    [Editor’s note: This post is excerpted from today’s NORML weekly media advisory.]

    A revised budgetary analysis by the California State Board of Equalization (BOE) estimates that taxing and regulating the retail sale of cannabis by adults would raise approximately $1.4 billion in annual new state revenue.

    The BOE’s estimate, released late yesterday, assesses a $50 per ounce tax on the retail sale of cannabis (among other state-imposed costs), as recommended under Assembly Bill 390: The Marijuana Control, Regulation and Education Act.  This act seeks to license and tax the commercial production, packaging, and retail sale of marijuana to those 21 years of age or older.

    As introduced, AB 390 would not impose taxation or licensing requirements on the non-commercial production of cannabis (up to ten mature plants), or on the not-for-profit distribution of pot.  Further, the bill would not alter existing legislation on the use of medicinal cannabis, nor would it impose new taxes or sanctions on the medical cultivation of cannabis.

    According to the BOE’s revised calculations, the enactment of AB 390 would raise an estimate $990 million annually from the proposed $50 per ounce levy on retail sales of marijuana in addition to another $392 million in yearly sales tax revenues.

    The BOE assessment did not assess whether the enactment of AB 390 would reduce existing law enforcement and prosecutorial costs, which have been estimated by California NORML to average some $200 million per year.  In 2007, a record 74,000 Californians were charged with marijuana offenses – the largest total since the state ‘decriminalized’ the personal possession of small amounts of marijuana in 1976.

    The BOE report acknowledged that legalizing pot for adults would likely result in a “substitution effect” where consumers gravitate toward the use of marijuana “and away from cigarettes and alcohol.”

    According to a May 2009 California Field poll of 901 registered voters, 56 percent of Californians say that lawmakers should “legalize marijuana for recreational use and tax its proceeds.”  Presently, the state is facing a $26 billion budget deficit.

    Assembly Bill 390 is presently before the Assembly Committees on Public Safety and Health, which are expected to take up the issue early next year.

    100 Responses to “California Tax Board Says Regulating Commercial Pot Sales Would Yield $1.4 Billion Annually — Also Predicts Decline in Use of Booze and Tobacco”

    1. Seth says:

      I foresee very unhappy fast food employees of this law gets passed in cali. I could care less cus it’ll also for the restaurants to hire more people. More jobs for everyone! Like I’ve always said, what could be wrong about hittin’ the ol’ bong with your best pals over a movie and a bag of tacos?

    2. Anonymous says:

      $50 per Z is a 10% growers tax. There will be more tax.

    3. #41 adle1984,

      Good point on the up coming generation’s choices we never had.

    4. Ben says:

      They need to hurry up with this bill.

    5. Nick says:

      In response to Yung Iowan, with respect –

      $6.25 tax for an eighth sounds terrible. A pack of 20 cigs costs $6.25, with an already unreasonably high tax. And you only get 3-4 good cigs out of an eighth.

      Remember, the Government works for YOU. You shouldn’t have to pay them money in order to pursue your own happiness.

      Peace and love

    6. […] Re: Need Help Reading Law. CA – 390 the $5000 is for commerical growth only "As introduced, AB 390 would not impose taxation or licensing requirements on the non-commercial production of cannabis (up to ten mature plants), or on the not-for-profit distribution of pot. Further, the bill would not alter existing legislation on the use of medicinal cannabis, nor would it impose new taxes or sanctions on the medical cultivation of cannabis." California Tax Board Says Regulating Commercial Pot Sales Would Yield $1.4 Billion Annually — … […]

    7. David says:

      Prohibition didn’t work with alcohol and it certainly isn’t working now with marijuana.

      Time to legalize it!

    8. Colonel Canabis says:

      DUH! Make it legal…I’ll have my 10 mature plants growing ASAP!

    9. #34 Dale Says:
      July 16th, 2009 at 9:44 pm

      If that’s what it takes to get people on the bandwagon, then by all means spread this bloated, unrealistic figure, but Ammiano’s bill sucks and I hope it will be changed before it becomes law. The tax rate is way too high, and there are no provisions for regulating the product, only for regulating the distribution of it.

      How about people get over the Drug War hysteria and just legalize marijuana with a modest, reasonable tax, and regulate the purity of the product instead of requiring armed guards during its production and distribution?

      My full critique is at http://legalizationwiki.org, along with a proposal for a much better law which originated in Massahusetts.

      RE:
      Thanks for link to legalizationwiki.

      – With exception to the overly-excessive,
      threefold to fivefold of AB390’s ‘modest’ $50 / oz tax-rate,
      I’ve always favored the Massachusetts legalization proposals for
      more clearly defining product-purity,
      (And especially,
      the provision allowing lawsuits against
      suppliers / distributors / retailers for
      adulterating / diluting cannabis!),

      retail-distribution systems and
      cannabinoid-percentage grading / labeling.

      And…
      for NON-COMMERCIAL personal-grow exemption,
      patterned after home-brewing exemptions to alcohol license-fees / taxes.

    10. Bradley in Fort Worth, Tx says:

      keep it rollin’ californiaaaaaa.
      we wish you guys the best of luck in Texas
      peace and love peace and love

    11. Justin says:

      While I don’t really like the people of California. (They are extremely rude to military personnel) If this passes it would be a tremendous step forward. I nevered tried pot until recently and now am a full beliver in medical cannabis. I suffer from debilitating insomnia and am considering trying an occasional hit to help me sleep. Any suggestions?

    12. I agree with jeremy #42. Id gladly pay tax to smoke legally. 50? Shiiiiit Oz’s are 120 here anyway and if u get caught in Kansas…sayonara. Sure its easy for those of you out there to say ah to hell with that ill go to my dealer where its cheaper. But for those of us who have to live in towns where the pots not only expensive it can go dry for as long as a month sometimes. And with jai looming overhead…no id rejoice a persecution free smokin habit.

    13. Jeremy R. says:

      $50 an ounce tax is ok if it helps get mj legalized and taxed but their are other ways other than $50 an ounce tax which can make taxing mj easy. What they propose is like saying for an example you buy a pack of cigs which is around $6 a pack then by adding a $50 tax which means it would cost around $56 for a pack if you get the idea. Now say for example they legalize and tax mj by a pack of
      10 and charge for that pack $25 then add a $20 tax on the pack it would be $45 for that simple pack which I believe
      many of people who want to use mj and have it taxed would be most likely willing to pay. Why? It is simple (1) it under cuts the cartels price and (2) It can be a reasonable way to manage and tax mj. This was only an example but I think every one gets the point.

    14. Firstly number 61 not all people from cali are rude. I got two friens over there thatd giv ya the shirt off their backs. Second, yeah heres a suggestion stop being scurred and hesitant and toke up. Youll sleep great

    15. D-Bag says:

      I just need to know when to plan my 2-week long vacation to Cali.

    16. Matter of fact dont wait HIT THAT SHIT SOLDIER!!!!!! Its perfectly safe. If you knew the FULL truth about pot youd been smokin long ago. All the propaganda about it is sad. Its a HEALER of minds bodys and souls. Friends all drinkin=violence Friends all Tokin= Bonding, friendship, strength, and munchies. NOW DROP AND GIVE ME 20 PUFFS

    17. Ive done alot of other real drugs. Meth, coke, acid, X, and even americas favorite booze are WAY harsher. Pots like iced tea or somthin like that in comparison. Theyd have you belive pots from the devil. HA! Its so harmless. The drugs listed above avoid at all costs. The devil pukes and shits em all into exsistence

    18. Adam says:

      I recently emailed the very conservative Rep. Scott Garrett and received a surprising response:

      Dear Mr. ______:

      Knowing of your interests regarding the legalization of medicinal marijuana, I would like to take the opportunity to update you on this very important issue.

      As I am sure you are aware, the mention of medical marijuana is absent from our United States Constitution. Therefore, as the 10th amendment dictates, I believe that each state has the power to enact its own medical marijuana laws. While I am opposed to illegal drug use, including marijuana, I hope that each state decides for itself whether or not to prohibit the use of drugs for potential medical reasons. So far, 13 states have passed medical marijuana initiatives, but the U.S. Department of Justice continues to enforce federal law regarding Schedule I substances, including marijuana.

      Since the commencement of the 111th Congress, several bills have been introduced addressing the issue of legalizing medically prescribed marijuana. Congressman Barney Frank (MA-4) introduced H.R. 2943, the Personal Use of Marijuana by Responsible Adults Act of 2009. If enacted, this legislation would amend the Controlled Substance Act to eliminate federal criminal penalties for personal possession of marijuana when not in excess of 3.5 oz. In addition to this legislation, Congressman Frank has also introduced H.R. 2835, the Medical Marijuana Patient Protection Act. This bill aims to clear the judicial discrepancies between federal law and the state laws that have enacted regulations governing the therapeutic use of marijuana. H.R. 2835 would make medically prescribed marijuana permissible under federal law. Both H.R. 2835 and H.R. 2943 have been referred to the House Committee on Energy and Commerce for further consideration.

      While I am not a member of the Committee on Energy and Commerce, you will be pleased to know that during the 110th Congress, I was supportive of Representative Maurice Hinchey’s (NY-22) amendment to H.R. 3039, the Departments of Commerce and Justice, Science, and Related Agencies Appropriations Act of 2008. This amendment prohibited the use of federal funds for the purpose of preventing states from implementing their own state laws that authorized the use, distribution, possession, or cultivation of medical marijuana. Unfortunately, this amendment failed by a vote of 165-262.

      Please know that your views are important to me and as legislation dealing with marijuana issues comes before the House of Representatives, I will consider it with your thoughts in mind.

      Even the most conservative politicians are starting to come around! Garrett previously was an opponent of the reform movement, however now he seems to be supportive of this initiative because of his philosophy of keeping the government out of private affairs. This should be a wake up call to those who are represented by prohibitionists that if we keep the pressure on, eventually they will cave to truth and reason.

      Keep emailing and calling your representatives until prohibition is over!

    19. calirep420 says:

      The $50 tax WILL NOT be added on top of the current street prices. Marijuana does not cost very much to produce. The reason street prices are as high as they are is because it is illegal and the risk of producing, possessing, and selling is high. If it were legalized it would probably cost the same or less then it does on the street today.

      Do some research people!

    20. Anonymous says:

      WELCOME TO CALIFORNIA

      $50.OO PER OUNCE IS A GROWER’S TAX. It’s a 10% tax.
      $6.25 per eighth is a more like 20%.

      Legalization of cultivation…won’t get any creedance
      until next year, most likely, but creedance it will get…patience folks. The wheels of the Gods are slow, but they grind very fine.

    21. Jerry Moler says:

      This reminds me of an old comic book called the Fabulous Furry Freak brothers. I used to have a poster that Quoted Franklin Freak as saying “Dope will get you through times of no money better than money will get you through times of no dope”. I think this still rings true today more than ever. If California does lift cannabis prohibition and the feds leave them alone they will see the lions share (a windfall) of the market. It would resemble Las Vegas before the rest of the country allowed gambling.

    22. al menefee says:

      NO, To TAXES, due to the reasoning that, once under their control it WILL be UNDER THEIR CONTROL, and that’s why I don’t want them to have ANYTHING to do with CANNABIS, whatsoever!!! “GOD” GAVE THIS, “PLANT”, TO ME, TO USE AS I SEE FIT!!! END OF STORY! PEACE!!! AL….

    23. al menefee says:

      You see, This would be, TRUE FREEDOM, As I stated previously. “KEEP YOUR DIRTY HAND’S””OFF” “MY CANNABIS”. “YOU” “DAMN” “DIRTY” “APE”!!. Money is all you want, then you can PRINT all you WANT. Just leave “ME” and “MY CANNABIS” OUT, Of your greedy little mind’s. NO PEACE!!! AL…

    24. G says:

      It’s probably a lot more $$$. Just considering it’s a black market.

      http://iblowminds.com/

    25. Anonymous says:

      To be honest, it’ll be pretty easy to circumvent the $50/ounce tax by just growing your own.

    26. Anonymous says:

      O.K. Cultivation is covered (certified-licensed growers). Now! what about distribution? My guess is government operated dispensaries. It will all be about “CONTROL.”

    27. jason says:

      i agree with justin #61 i suffer from insomnia have not slept in over a week. my guy has been out so i cant sleep until tonite thank god. i live in upsate ny. i have been arressted for a roach and a pipe before they threw so many charges was not even high. if mj was legal the police can save so much time and money on us people that use it and they can just make it illegal to grow or sell without a license. they can still go after the big people that kill or rob people for mj and let us people that have to be afraid everytime we buy some. and many i would loveto pay the price you guys get mj for and 1/8 around here is 40 or 50 if you know someone you can get it cheaper i got some AK47 couple weeks ago cost me $30 a gram.

    28. Bradson says:

      This is a move in the right direction, especially with the right included to home grow without taxes or other interference. It will be fascinating to watch what happens to retail prices as legalization takes hold. If tobacco can be so abundant that it sells for $12-15 and ounce (if 2 packs = 1 ounce) with all taxes included, it’s not out of the question for cannabis to eventually be equally abundant and inexpensive. Just because we’re used to paying outrageous black market prices relative to the cost of growing and distributing the plant, that doesn’t mean that the legal product must remain as expensive. I predict that a few years after legalization, good quality cannabis will retail for $10-20/ounce, all taxes included. Certain premium strains will be more expensive.

    29. Nic Tedesco says:

      don’t need the extra tax money or jobs, rather just imprison everybody for a smokeable substance that not only has countless medicinal benefits, is not lethal, and generally makes things more enjoyable.

    30. Anonymous says:

      There’s a few things that the public may, or may not be aware of or understand. The first is the costs involved in cultivation. It ain’t cheap. Next is the price for the substance (female flower). It’s pretty much a $20.00 per gram standard for medical grade…in the street and in the dispensary.

      Home grown=non-taxable.
      Qualified Patients=non-taxable.
      Growers=10% tax.

      If you consider the tax rate on any retail product…10% ain’t that bad.

    31. #78 Bradson Says:
      July 18th, 2009 at 7:22 am

      “…If tobacco can be so abundant that it
      sells for $12-15 and ounce (if 2 packs = 1 ounce)
      with all taxes included, it’s not out of the question
      for cannabis to eventually be equally abundant and inexpensive.
      Just because we’re used to paying outrageous black market prices
      relative to the cost of growing and distributing the plant,
      that doesn’t mean that the legal product must remain as expensive….”

      RE:
      Bradson,
      – This ought to be told to every prohibitionist
      sheriff and DA in the country. On a recent NPR radio program,
      a certain sheriff kept spouting the fallacious-argument that ‘taxed,
      retail pot wouldn’t reduce the underground, illegal-market, nor affect the cartels,
      because the retail-product would be $50 more-expensive…’

      (Ignoring the fact that cannabis isn’t THAT expensive to grow, that
      presently excessive street-prices are the ‘risk-premium’
      charged, solely due to its illegality…
      )

    32. Carl In S.F. says:

      Legalizing pot faces serious political obstacles. Taxation on the other hand, is easy.

      For those who endorse legalizing pot so as to tax it to help ease California’s budget problems, that’s a cop out. Take responsibility for yourself and voluntarily pay the tax you owe. It’s that simple.

      Californian’s that smoke dope illegally, simply declare your illegal pot purchases on your annual tax return. Multiply the dollar amount you contributed to the other side of the War on Drugs by your local tax rate then add it to your tax liability. Having done your part to ease California’s budget crisis, you will be able to sleep better at night without adding costs to the state for managing all the the negative effects of legalizing yet another social poison.

      Come to think of it this would work for cocaine, meth, extasy, LSD and even heroin. Remember though, California is broke so be honest about the amount of illegal drugs you buy. Every dollar you report spending on illegal drugs helps a crime syndicate, some where in the world, kill, mutilate and torture but more importantly, it will also keep teachers in barrio schools, doctors and nurses in trauma centers and rehab centers staffed with social workers. But then hey, the end justifies the means, right?

      As for legalizing pot to tax it, we don’t need more unnecessary laws we just need to enforce the laws already on the books.

      Pot is already taxed in California. Like every other state California has both a sales and a use tax. Retailers collect sales tax; we all understand and accept that. When the seller does not collect sales tax, the buyer is obligated by law to report and pay the tax. In these circumstances it’s called a use tax.

      So when illegal drug users buy dope and don’t pay either a sales or a use tax they are not only contributing to death and violence such as is going on in Mexico right now, they are also cheating California out of tax revenues it needs to keep doctors, nurses, teachers, police, firefighters, park rangers and tax collectors on the job.

      Potheads, join ranks with medicinal pot users who already pay sales tax. Illegal drug users don’t need spineless politicians in Sacramento endorsing drug use to pay the tax they owe. Just declare your usage on your tax return and pay voluntarily.

      Dopers should take a page from the Gay & Lesbian community and come out of the closet. Exert your right to pay sales tax! If you won’t do it for yourself, do it for the kids.

    33. PressureKook says:

      Response I got from Governor Schwarzeneggers office:

      “Thank you for contacting Governor Schwarzenegger about marijuana in our state. The Governor values hearing from fellow Californians about the issues that are important to them.

      While the Governor does not support legalizing marijuana to generate revenue, he does think there should be an open dialog on the issue of legalization. He believes we should look at other governments and analyze their experiences with legalizing marijuana, weigh the benefits and problems they’ve encountered and determine if and how those experiences would apply to California.

      Once again, the Governor appreciates your input on this very delicate issue.

      Sincerely,

      Rosemary Rawlins
      Office of Constituent Affairs”

    34. Anonymous says:

      Arnold

      This is California…we make dust…we don’t eat dust.
      “Lead” the way. “I’ll be back!”

    35. […] Commercial pot sales in California? July 19th, 2009 | Author: admin California Tax Board Says Regulating Commercial Pot Sales Would Yield $1.4 Billion Annually — Also… […]

    36. Anonymous says:

      I was in a “famous” fast food restaraunt the other day, and ordered one of their “famous” hamberger combos. It came to $5.00. I had to use my ATM card. The attendant said that there would be a $1.00 charge for the use of my ATM card. That’s a 20% use charge. That’s 10% more than the $50.00 per Z tax. Needles to say…I wasn’t very happy…but…I imagine “Happy” was happy. Just think about it…a 10% growers tax ain’t that bad in comparrison. The fact that we’ve gotten this far is a monumental achievement.

    37. jeff newman says:

      wow, tobacoo, alcohol, & big pharma are shaking in their boots!!

      cannabis & hemp will be legalized and there won’t be nearly as much use of the other big three that kill so many humans yearly.

      those wise ones that choose to consume cannabis & hemp will live long and healthy lives. stop the WAR ON THESE 2 PLANTS NOW.

    38. JHC says:

      The Federal TAX on cigarettes is $1.01 a PACK.

      The Proposed STATE tax of $50.00 an OUNCE seems a little high to me.

      In the long run They need to set the tax rate correctly or they will not sell any Marijuana. The Black market will remain strong. Priced correctly say .05 a gram is more like it.
      The problem is that these numbers do not help solve the states money issues as much as they would like.
      Think about it they sell this deal to the state and the tax rate will be set WAY TOO HIGH. Provisions need to be placed in the bill allowing for the reduction of the tax rate.

      I see this as both a positive and negative situation. Legalizing Marijuana based upon a VERY HIGH Tax rate is dangerous. Not legalizing the stuff continues a very dangerous precedent.

      You have to assume that commercial packaging, standardization, labeling, marketing, Growing, sales, all provide income to everybody involved. How do you regulate it? Like Utah and alcohol? State marijuana shops?
      How do you tax edible products? What about concentrates? Will these be legal too?

      I reckon that Phillip Morris and all major tobacco companies are ready to go with production and marketing. They would love a new product to go into as they move away from tobacco. Imagine going from UNPOPULAR to extremely popular over night. from major supplier of tobacco products to major high quality Marijuana producer….
      In the end I see BIG tobacco being as big as BIG Booze and big BEER. Maybe bigger.
      YMF

    39. Paul says:

      #88, JHC, yes you’ve nailed it. $50.00 an ounce is way to high to attract any buyers which would be the point if taxation is an appeal. But tobacco is a little different from cannabis. Processing tobacco is a little more complicated then cannabis. All you really have to do is pull cannabis and dry it. Tobacco needs to be cured to be any good. And I’d like to see the tobacco companies list the ingredients on the side instead of the warnings. And what about those warnings? Shouldn’t we see some kind of warnings on the sides of commercially packaged cannabis, like “Don’t operate heavy machnery under the influence of cannabis.”

      I wonder if the tobacco producers and growers would be all that excited about cannabis. I think the real wild card in the issue is the growers for fiber and seed. Once they are free to grow the old fashioned cannabis, they are bound to ask themselves if they want to get into the flower and leaf business.

    40. […] would have created a per-ounce excise tax of $50 across the state, which could have created $1.4 billion in new revenue, according to the California State Board of […]

    41. james says:

      HI,
      i have lurking around these forums for a while now. I now have my questions to ask and contrubutioons to make.

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