California rejects medical cannabis taxes, for now ASA defeated state and local medical cannabis tax measures this year
August 13, 2016 | Don Duncan
The Senate Appropriations Committee held AB 2243 in its suspense file this week, blocking the bill from being approved this year. The bill by Assembly Member Jim Wood (D-Santa Rosa) would have imposed a new tax of up to $9.25 per ounce on licensed medical cannabis distributors. This is the second medical cannabis tax bill to die this year. The Assembly Revenue and Taxation Committee killed SB 987 in June. That bill by Senator Mike McGuire (D-San Rafael) would have imposed an additional 15% excise tax on medical cannabis consumption.
ASA opposed both medical cannabis tax bills this year because we believe the imposition of additional taxes is premature and represents an undue burden on legal patients. We rallied our base to email, call and visit lawmakers in opposition to AB 2243 and SB 987. It paid off this year, but tax proposals affecting patients will keep coming up at the state and local level. That is why it is so important for ASA to bring the patients’ voices to the table and to empower local advocates.
Voters may approve or reject a voter initiative imposing a 15% tax on medical and non-medical cannabis in November. The legislature should wait to see what voters do before moving forward with other taxes. If Proposition 64 loses, lawmakers may want to think twice about imposing taxes that voters rejected. If it wins, the additional taxes will be unnecessary.
Medical cannabis is already subject to ordinary state sales tax of up to 10% plus local taxation of up to 15% in some cities and counties. Unlike other medicines, medical cannabis is not covered by insurance. The full cost of the medicine and all taxes are borne by the patients. That can make medical cannabis too expensive for some patients who use it to treat chronic pain, cancer, HIV/AIDS, and other serious conditions.
Voters are likely to funnel cannabis tax dollars into substance abuse prevention, law enforcement and environmental remediation for illegal cultivation in November. But even if they do not approve Proposition 64, the state has other revenue sources to pay for medical cannabis licensing, regulation and enforcement. The newly adopted Medical Cannabis Regulation and Safety Act (MCRA) requires applicants to pay for all of the costs of licensing and regulation, while existing law assesses fines and penalties for medical cannabis businesses that break the rules.
While state legislators are having a hard time finding the two-thirds majority they need to adopt a new tax, some cities and counties are looking to medical cannabis consumers and businesses to plug gaps in their budgets. ASA successfully opposed a proposal in Los Angeles County that would have asked voters to impose an additional 15% tax on medical cannabis to pay for services for the homeless. The motive is a noble one, but asking legal patients to fix an intractable and systemic social problem by paying a “sin tax” on medicine is just bad policy. In response to ASA’s opposition, the Board of Supervisors made a wise choice to withdraw the proposal.
State and local taxes on medical cannabis are premature and burdensome, but they may also be counter productive. A report issued by the Tax Foundation, the nation’s leading independent tax policy research organization, says, “Colorado, Washington, and Oregon have all taken steps to reduce their marijuana tax rates, with Alaska considering it, after initial rates of 30 percent or more did not reduce the black market sufficiently.” Cannabis and medical cannabis may seem like an easy solution to hard financial times, but lawmakers who try to squeeze too much revenue from adult users and patients may actually undermine the emerging legal industries and feed the black market.
ASA will continue to call on state and local lawmakers to use restraint in taxing medical cannabis, and we will keep bringing patients into the conversation about what medical cannabis will look like in California moving forward. Thanks to all of our members and friends who support and participate in that effort.