California Cannabis Tax Cuts Will Impact Social Programs, Opponents Say MJ Operators Are 'Hiding Behind A Smoke Screen'

California Senator Mike McGuire's tax relief bill intended to get the state's cannabis industry back on its feet was not particularly welcomed by various youth and social justice groups, reported the North Bay Business Journal. 

A letter signed by 152 children’s advocacy groups pointed out that cutting state cannabis taxes will have "an immediate, negative impact on thousands of children living in poverty and children of color across our state.”

Child care– and healthcare-related organizations rely on the $385.8 million generated by cannabis tax funds to support their programs that benefit some 21,486 low-income children. Roughly $150 million of the annual funding for youth prevention services is earmarked in this budget for communities with people of color.

Social Services Advocates Speak Out

“We have a really big stake in this. We hear a lot from the cannabis industry but not from those who benefit from these taxes. This is near and dear to us,” said Mary Ignatius, organizer of Parent Voices, a grassroots organization working on making childcare accessible.

Ignatius is not alone. Dr. Lynn Silver, Public Health Institute program manager said that with lower tax requirements, marijuana operators are effectively “violating the intent” of what voters approved in 2016 under Prop. 64, which legalized cannabis. The pediatrician implied that the anti-taxers are pushed by big cannabis corporations who seek to maximize profits at the expense of children’s programs.  

 “It’s time to put our kids first and say no to cannabis tax cuts. We need every cent of cannabis revenue,” Silver said, accusing the industry of “crying wolf” when times get tough. “They’re hiding behind a smokescreen.”

Beginning in 2022, marijuana is taxed at a flat rate of around $161 a pound, on top of a 15% excise tax as well as local growing, producing, processing, distribution and retail taxes. In the first three quarters of last year, California saw nearly $1 billion in cannabis tax revenue. 

After strenuous complaining by cannabis operators about burdensome taxes, Governor Gavin Newsom announced in December that he would consider cannabis tax reform to avert an all-out rebellion or worse, the collapse of the industry. 

Newsom's budget proposal revealed his support for “cannabis tax reform and plans to work with the Legislature to make modifications to California’s cannabis tax policy to help stabilize the market.”

Newsom said at the time that he’d try “to get these municipalities to wake up to the opportunities to get rid of the illegal market and the illicit market and provide support and a regulatory framework for the legal market.”

The governor’s budget estimated that California could generate $787 million in marijuana revenue in the 2022-23 tax year. Of that amount, almost $595 million is earmarked for youth substance abuse treatment, elimination of illegal cannabis grows and support for public safety-related activities.

Possible Solution? 

California Cannabis Industry Association executive director Lindsay Robinson brought up another point. “We know how vital these funds are. But when the legal businesses fail, the funding will dry up.” 

She added that market stabilization via temporary reprieve could bring in more operators, which would ultimately benefit children’s programs.

“We hope the lower taxes will bring in more legal businesses,” Robinson said. “We couldn’t agree more these funds are important (to youth programs). It’s not our intent to cut the funding.”