Long Beach Remains an Inspiration to Cali’s Failing Cannabis Market

Bloomberg recently reported that despite things going awry in many areas throughout California, Long Beach is setting a new standard. This involves a tax experiment that started back in 2019.

The idea behind legalizing cannabis was to push the illicit market and crime surrounding it out, all while benefiting from the taxation of this regulated, licensed product. However, California has been struggling as its massive illicit cannabis market continues to thrive.

Cali was one of the first states to legalize, both medical and recreational cannabis. Medical use cannabis became legal in 1996. And in 2016, the state voted to legalize marijuana for recreational use.

However, more recently, cannabis cultivators, dispensary operators, and cannabis business groups throughout the state have struggled. They’ve demanded reform with claims that the industry is ready to collapse as wholesale prices fall. Many small craft cultivators and cannabusiness operators are preparing to fail.

They claim that the main issue is taxation. The state has a 15% state-wide excise tax in addition to the local taxes on cultivation and manufacturing. Thus, many products are inflated in price, especially compared to the illicit market.

Another issue is the “cannabis deserts.” These are towns that prohibit cannabis dispensary operations, which lessens the cost of illicit cannabis while making it convenient for consumers to flock to the black market for their products.

The California illicit market is worth $8 billion and continues to gain traction, particularly amidst the pandemic. Many consumers are shopping for lower prices after stimulus checks stopped, and the problem isn’t just impacting cultivators and dispensaries – even the government is feeling the pain.

Long Beach’s experiment showcases how a thriving legal marketplace can exist. The city lessened its supply-chain tax, and in 2020, it stopped a proposed tax increase, choosing instead to increase cannabis retailers’ hours of operation. Thus, they increased their sales and tax generation.

With these steps, tax revenue is on the rise. This has actually doubled the number of cannabis-related jobs from 2019 to 2021. While it may seem counterintuitive to lower taxes to increase tax revenue, it’s become increasingly apparent that this is the way to make it happen.

What do you think? Should taxation in the cannabis space be lowered? Do you believe that this could save the state’s legal cannabis industry?

Let us know in the comments below!

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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