“Our industry is collapsing,” California pot leaders warn in a letter to Gavin Newsom
Five years into the legal sale of adult cannabis in California, and the industry is at a “kink”. Top cannabis industry insiders sounded the alarm as the industry countered implosion amid impossible tax rates and other serious problems.
In a December 17 letter, over two dozen cannabis managers warned California Governor Gavin Newsom, Pro Tempore President Toni Atkins, and spokesman Anthony Rendon that the state’s cannabis industry was on the verge of collapse.
According to the letter, only major tax cuts and a rapid expansion of the retail business can save the industry. Two-thirds of California’s cities don’t have pharmacies as local governments authorize sales and manufacturing.
California is set to hike cannabis growing taxes next month – although the Legislative Analyst Office estimates the state will have a budget surplus of $ 31 billion for the next year. On January 1, 2022, the California Department of Tax and Fee Administration (CDTFA) will raise the state cannabis growing tax on dried flowers by nearly five percent, to a whopping $ 161 per pound and over $ 10 an ounce. It is this tax that is exceptionally heavy for farmers who cannot even break even. Because of this, California NORML warned of the tax hike last month.
The letter offers a solution to some of the immediate problems. Specifically, industry leaders called for three things that must change in order for California’s legal cannabis industry to survive: an immediate abolition of the cultivation tax, a three-year leave of absence from excise duties, and an expansion of retail outlets across much of the state’s state.
“It is important to recognize that our unwillingness to effectively legislate, implement and monitor a functioning regulated cannabis industry has brought us to our knees,” the letter said. “The California cannabis system is a national mockery; a public policy lesson on what not to do. Despite decades of government persecution, we have been willing and adaptable partners in the struggle to regulate cannabis. We have tirelessly asked for changes, with countless appeals to the legislature that have gone unheeded. Together we have reached a point of intolerable tension and will no longer support a system that perpetuates a failed and retrograde war on drugs. ”
The current system “is so rigged that all will fail,” they wrote.
High tax rates are pushing consumers back into the black market, where tax-free cannabis is cheaper. “The opportunity to create a robust legal market was wasted through excessive taxation,” the letter says. “Seventy-five percent of cannabis in California is used in the illicit market and is untested and unsafe.” Some local governments took the matter into their own hands. For example, the San Francisco board of directors unanimously approved a measure to temporarily suspend the city’s cannabis corporate tax to combat illegal cannabis sales.
Once the higher cultivation tax comes into effect, “most consumers will take off,” Strong Agronomy’s Darren Story said during a December 17 conference call with journalists and media representatives. Organizers are preparing for a Boston Tea Party-inspired rally on Capitol Steps in Sacramento in January 2022 to protest tax rates and other industry issues. “Forget the Boston Tea Party. Here comes the California weed tax revolt, ”read the headline of a The San Francisco Chronicle. The leaders represent almost every sector of the California cannabis industry.
The full list of industry leaders who signed the letter is below:
- Alec Dixon, Co-founder of SC Labs
- Amy Jenkins, President of Precision Advocacy
- Andrew DeAngelo, Co-Founder of Harborside, California Cannabis Industry Association, Last Prisoner Project
- Konrad Gregor, President of the CCIA Board of Directors
- Dale Gieringer, California NORML Director
- Darren story, Founder of Strong Agronomy
- David Hua, CEO and Founder of Meadow
- Dennis Jäger, Founder of CannaCraft
- Erich Pearson, Founder of the SPARC Farm and Pharmacies
- Ingrid Tsong, Self-employed farmer and co-founder of Beija Flor Farms
- Jacob Heimark, CEO and Co-Founder of Plus Products
- James Kim, CEO and co-founder of STIIIZY
- Jamie Warm, Co-CEO of Henry’s Original
- Jeff Gray, CEO of SC Labs
- Jerred Kiloh, Owner of Higher Path Pharmacy and President of the United Cannabis Business Association’s trading group
- Jigar Patel, Co-CEO, NorCal Cannabis Company
- John De Friel, CEO and Co-Founder of Raw Garden
- Joshua Keats, Founder and Co-CEO of Henry’s Original
- Karim Webb, CEO 4th MVMT
- Kristi Palmer, Co-founder of KIVA Confections
- Lindsay Robinson, Executive Director of the California Cannabis Industry Association
- Michael Ray, Founder and CRO, Bloom Farms
- Michael Zumpano, CEO of Versagenix
- Flavia Cassani, Co-founder of Flow Cannabis Co.
- Mikey Steinmetz, Co-founder of Flow Cannabis Co.
- Nara Dahlbacka, Partner of the Milo Group
- Ray Landgraf, Founder and CEO of Island Cannabis Co.
- Steve DeAngelo, Cannabis Rights Activist, Chairman Emeritus of Harborside Inc.
- Vince C. Ning, Founder and Co-CEO of Nabis
In response to the letter, Newsom spokeswoman Erin Mellon said in a statement that the governor supports cannabis tax reform and acknowledges the current issues, while at the same time expanding enforcement measures against illicit sales and production. “It is clear that the current tax structure poses unintended but serious challenges. Any tax reform effort in this area requires action from two-thirds of the legislature and the governor is open to working with them on a solution, “Mellon said.
The letter ensures that leaders understand the urgency and scale of the problem. “The solution to these problems and the ability to save this industry is in your hands,” the letter said.