The Crow here for c4ocradio.com

LOS ANGELES (AP) – The Democrat’s proposed spending plan, released Thursday, projects the state will bank $355 million in marijuana excise taxes by the end of June. Deep in Gov. Gavin Newsom’s new budget is a figure that says a lot about California’s shaky legal marijuana market: The state is expecting a lot less cash from cannabis taxes. That’s roughly half of what was once expected after broad legal sales kicked off last year.
Most consumers are continuing to purchase pot in the illegal marketplace, where they avoid taxes that can near 50 percent in some communities. Tax collections are expected to gradually increase over time, but predicting what that amount will be remains something of a guess. Industry experts say the diminished tax income reflects a somber reality. Tax collections for “a newly created market are subject to significant uncertainty,” the budget said. Josh Drayton of the California Cannabis Industry Association credited Newsom with taking “a realistic look at the challenges” after a bumpy first year of broad legal sales. Newsom also recommended a sharp increase in spending for regulatory programs, although it’s an open question whether it will be enough to help steady the state pot economy.

Initially “the state was too optimistic about how the implementation of legalization was going to work. This governor has paid attention to that,” Drayton said. The budget recommends just over $200 million for marijuana-related activities in the fiscal year that starts July 1, which would be over a 50 percent boost from the current year. That said, Drayton added that legal businesses need a break from hefty tax rates that are driving consumers to the illicit economy. Local governments are free to slap taxes on sales and on growers too, which has created a confusing patchwork of tax rates around the state. Various proposals have been made to cut state pot taxes.
The state’s top marijuana regulator, Lori Ajax, has said the state intends to get more businesses licensed and operating in 2019, while cracking down on rogue operators who continue to proliferate across the state.
By some estimates, up to 80 percent of sales in the state remain under the table, snatching profits from legal storefronts. At year’s end, California’s effort to transform its longstanding illegal and medicinal marijuana markets into a unified, multibillion-dollar industry remained a work in progress. Meanwhile, the courts budget includes nearly $14 million for resentencing of thousands of drug offenders whose offenses are no longer crimes since California legalized recreational pot.

The Crow is a contributing writer for c4ocradio.com

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