New Study Finds Keeping or Eliminating California’s Cannabis Cultivation Tax Yield Similar Revenues

New Study Finds Keeping or Eliminating California’s Cannabis Cultivation Tax Yield Similar Revenues
Cannabtimes

<![CDATA[A new study on California’s cannabis tax structure and low participation in the state’s legal market suggests that lawmakers should consider repealing or suspending the cultivation tax—a revenue stream that grossed more than $163 million in 2021.The six-part study was published May 4 in a 42-page report by Los Angeles-based Reason Foundation, a nonprofit libertarian think tank. It provides an empirical model to estimate the degree to which California’s tax regime affects participation within its commercial cannabis market. One key finding was that keeping the state’s current tax structure would generate slightly more revenue than reducing tax rates, based on market growth projections for December 2024. However, eliminating the cultivation tax would bolster enough market growth to yield similar revenue results over the same time period (see full details below).  The study also provides further insights on California’s various tax structures and examines consumer decisions to participate in the legal or illegal market in an effort to quantify the impact of taxes on participation. “Taxes affect both consumers’ and producers’ decisions in the legal market primarily by introducing a price disparity between legal cannabis products and comparable cannabis products offered through the illicit market,” wrote Geoffrey Lawrence, the foundation’s managing director of drug policy, who authored the report. “Similarly, local bans on legal sales over extended geographic areas can drive consumers without access to legal products within a reasonable distance of their homes to purchase substitute goods on the illicit market,” he added.The Bottom LineIn the conclusion of the report, Lawrence suggested that wholesale cannabis taxes are hidden from the ultimate consumer, and are difficult to administer, audit and “pyramid” up the supply chain. He added that the Reason Foundation’s analysis makes clear that repealing California’s cultivation tax will result in faster growth of the legal market and will “quickly”…

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Source : New Study Finds Keeping or Eliminating California’s Cannabis Cultivation Tax Yield Similar Revenues

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