Late last year, I noted that over-taxation and over-regulation have impacted the amount of tax generated from marijuana sales in California.

Now, in a stunning move, lawmakers are looking to reduce taxes on legalized marijuana.

Frustrated that California’s licensed marijuana industry is struggling to compete against the black market, a group of state officials is pressing to slash taxes on legal pot shops and growers.

State Treasurer Fiona Ma and four legislators proposed a bill Monday that would cut the state excise tax on marijuana sales from 15% to 11% for three years, and suspend the cultivation tax of $148 per pound during that period.

“The black market continues to undercut businesses that are complying with state regulations and doing things the right way,” said Assemblyman Rob Bonta of Alameda, the primary author of the measure. The tax cut, he said, will help “keep customers at licensed businesses and help ensure the regulated market survives and thrives.”

The proposed measure, Assembly Bill 286, has been dubbed the Temporary Cannabis Tax Reduction bill. It would temporarily cut state excise taxes for legal marijuana retailers from 15 percent to 11 percent and also suspend cultivation taxes altogether through 2022.

Supporters say the current taxes and costs that legal cannabis businesses face make for an uneven playing field with competitors from the grey and black markets.

The proposed legislation, which is sponsored by state Treasurer Fiona Ma, follows California’s tax revenue for the industry coming in $101 million below projections in the first six months of 2018. State officials have blamed the shortfall on exorbitant taxes placed on the legal pot industry as well as challenges due to limited access to banking.

“We don’t tax start-up businesses [from other industries] when they start,” the state treasurer said. “We need to do better.”

This might be good timing. New reports indicate that the Trump administration’s war on marijuana legalization may soon end.

A year ago, the Department of Justice, under the leadership of Attorney General Jeff Sessions, made a move widely interpreted as a signal to federal prosecutors and other law enforcement officials to crack down on cannabis — and marijuana businesses — in states that had legalized pot: It rescinded guidance issued during Barack Obama’s presidency that allowed states to legalize pot without the threat of federal interference even as marijuana remained illegal under federal law.

But Trump’s nominee to replace Sessions as attorney general, William Barr, confirmed in written responses to questions from US senators that he won’t be continuing that push to crack down on legal pot if he is confirmed by the Senate.

“As discussed at my hearing, I do not intend to go after parties who have complied with state law in reliance on the Cole Memorandum,” Barr wrote, referring to one piece of the Obama-era guidance.

Hopefully, California’s politicians have learned a valuable lesson about taxation and prosperity.

 
 
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