After listening to the financial challenges facing legal cannabis growers, their business partners and employees, the Lake County Board of Supervisors (BOS) on Jan. 25, 2022, unanimously passed a resolution urging Gov. Gavin Newsom to reduce cannabis cultivation taxes and implement a sustainable tax system for cannabis farming. In the resolution, the BOS also asked the state to give county law enforcement “enhanced and expended financial resources” to address illegal cannabis grows and bolster enforcement measures against illegal cannabis activities.
More than a dozen people spoke at last Tuesday’s BOS meeting about the hardships they’re experiencing as a result of the taxes imposed on legal cannabis growers, plummeting prices and the ever-growing illicit cannabis industry. The taxes were approved by California voters in 2016, when they passed Proposition 64, which legalized the possession, cultivation and sale of cannabis by adults aged 21 or older. Proposition 64 levied a 15% excise tax on the retail sale of cannabis and cannabis products, and a cultivation tax of $9.25 for flowers per dry-weight ounce and $2.75 for leaves per dry-weight ounce on all harvested cannabis that enters the commercial market. According to the state budget, “…cannabis excise taxes generated $770 million in 2020-2021 and are projected to generate $771 million in 2021-2022 and $787 million in 2022-2023. The year-over-year decline in 2021-2022 budget reflects data for the first quarter of 2021-2022 indicating that consumption in the quarter fell from the levels seen during all of 2020-2021.”
As of Jan. 1, 2022, the California Department of Tax and Fee Administration raised the cultivation tax to $10.08 for flowers per dry-weight ounce and to $3 for leaves per dry-weight ounce. Tax on fresh cannabis plant per ounce went up from $1.35 to $1.41.
Supporters had hoped that Proposition 64 would tax the growth and sale of cannabis in a way that would drive out the illicit market for cannabis and discourage use by minors, and abuse by adults. Instead, the resolution states, Lake County, like other local jurisdictions, has experienced increased challenges collecting cultivation taxes, regulating commercial cannabis cultivators and addressing illegal cultivation. The BOS resolution also notes that the county’s ability to provide other core-mandated services has felt the strain of being “burdened by the onerous nature of state regulations, rapidly expanding illicit cultivation, and the economic instability of the legal cannabis market.”
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