Can California’s Legal Marijuana Market compete with the well-established Black Markets?

by: Ali Porras

Either buckle your seat belt or pass the joint, the marijuana revolution has just begun!

All throughout California, thousands of people have been raving about the legalization of recreational marijuana. On November 9, 2016, Proposition 64 legalized using and growing marijuana for personal use. Soon, on January 1, 2018, Proposition 64 will permit sales and taxation for recreational marijuana. Large marijuana companies and millennials are overjoyed while many businesses within the black market are in a panic. The Adult Use of Marijuana Act, also known as California Proposition 64, introduces a whole new world of opportunities for California, but it’s important to consider how this new law will impact California on a bigger scale.

California’s legal marijuana marketplace will have numerous new taxes and fees. To get an idea of exactly how significant taxes are expected to be, a small bag of marijuana in Los Angeles is currently about $35 and expected to increase at the retail counter to $50 or $60 in 2018. In the Los Angeles Times Article California slapping high taxes on marijuana, causing sticker shock for some, it says “Growers sell a trash bag stuffed with clippings to manufacturers for about $50. But come January, the state will tax those leaves at $44 a pound. That means the tax payment on a bag holding 7 or 8 pounds would exceed the current market price by five or six times, forcing a huge price hike or, more likely, rendering it essentially valueless” to the dismay of some.

With legal marijuana expected to be so heavily taxed, this raises questions regarding how the black market will be affected. High taxes could easily discourage average consumers to stray towards cheaper illegal resources, and that’s exactly what many dealers under the radar are hoping for. This has rallied up operators in the legal market to urge regulators to be very aggressive with shutting down all illegal operations. A Los Angeles medical cultivator and retailer named Donnie Anderson predicts the higher level of state taxation next year is “just going to help the illicit market thrive.”

The black markets for marijuana have been well established for decades while the legal market has just begun. There are too many factors to take into consideration to be able to predetermine the fate of this complex industry; but what we can say is that for both the legal and illegal markets, there is an unimaginable amount of money in marijuana. Especially for legal marijuana, which is expected to be a 13.3-billion-dollar industry by 2020 and provide around a quarter of a million jobs.

Source(s):

Press, A. (2017, November 05). California slapping high taxes on marijuana, causing sticker shock for some. Retrieved November 08, 2017, from http://www.latimes.com/local/lanow/la-me-pot-tax-20171105-story.html

Leave a Reply

Your email address will not be published. Required fields are marked *