Cali Could Double Cannabis Tax Revenues by Removing Cultivation Tax

According to Ganjapreneur, there was a recent study that revealed California could double its cannabis tax revenues simply by removing its state cultivation tax. This has the potential to bring more customers to the industry by encouraging industry pricing that’s more competitive to the traditional market.

Image from Ganjapreneur

The news report came from the Reason Foundation. At this point, Cali cannabis companies are challenged with some of the highest tax rates in the U.S. In this 36-page report titled, “The Impact of California Cannabis Taxes on Participation within the Legal Market,” uncovered that without the tax burden, licensed operators would have the ability to price their products in ways that compete with the illicit marketplace. This would bring more customers into the legal market, which would drive more tax revenue for the state.

“High cannabis taxes are the biggest reason California’s legal cannabis market is struggling,” explained Geoffrey Lawrence, author of the study and the director of drug policy at Reason Foundation.

Through this study, the researchers highlight some key factors that impact consumer decisions regarding whether to purchase from the legal market while incorporating a price sensitivity point that compares Cali to other close legal markets like Colorado and Oregon. It modeled the expected consumer behavior to determine how they would react to a California cannabis price decrease.

The researchers also uncovered that illicit sales are emboldened by local cannabis business prohibition ordinances, and by reducing retail excise taxes, it’s possible to encourage licensed cannabis operations in the state to more effectively compete with the illicit market.

Louis Levey is the Content Success Manager and Founder at No Strings Content. He's passionate about helping cannabis businesses use content to attract, educate, and convert audiences. His hometown is Boca Raton, Florida, but he currently lives and works remotely in Chiang Mai, Thailand.

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