The California cannabis industry faces an unsafe future in the middle of the proposed tax increase

The California cannabis industry, which has already been struggling with high operating costs and market instability, can be another major hurdle – high taxes. The legislators of the state consider a significant increase in tax in cannabis companies, a step that industry leaders could warn could remove many legal operators.

The proposed tax increase

An proposed legislation aims to increase consumption tax to cannabis products from 15% to 19%. A sharp jump from which the industry advocates would continue to express the claim of an already overloaded sector. Supporters of the tax increase claim that the additional income would help finance public programs, including the law enforcement efforts against the illegal market. However, legal cannabi operators warn that this increase could lead to even more consumers to unregulated sellers, which exacerbates an already problematic black market.

Industry reactions

Business owners and Cannabis Trade Associations threaten the proposal and argue that the existing tax structure of California is already one of the highest in the country. They point out that many small companies hardly remain afloat between local taxes, state consumption taxes, cultivation fees and license costs. Increasing taxes, they argue, will only benefit non -licensed sellers who can offer lower prices without legal compliance with the costs.

The black market problem

Despite Californian legalization of cannabis in 2016, the illegal market continues to dominate sales, whereby estimates indicate that more than 50% of cannabi transactions still occur outside of the right of right. Operators within the regulated market argue that excessive taxation and regulatory stress are partly to blame, which leads to a price difference that keeps consumers away from legal pharmacies.

What's next?

If the tax increase passes, it could redesign the industry by forced smaller companies to close and only survive well -financed companies. In view of the proposal, which faced himself against business owners and industry representatives, legislators may have to rethink how the generation of yields with the sustainability of the Californian legal cannabis market can be reconciled.