Saturday, April 21

Experts say marijuana taxes unlikely to weed out customers


Enja Eriksen, the manager of a medical marijuana dispensary called Paradise Collective, said she thinks high marijuana taxes will force the dispensary to increase the prices of the products it sells. (Marley Maron/Daily Bruin)

Enja Eriksen, the manager of a medical marijuana dispensary called Paradise Collective, said she thinks high marijuana taxes will force the dispensary to increase the prices of the products it sells. (Marley Maron/Daily Bruin)


New marijuana taxes that go into effect January may increase prices, but probably will not reduce marijuana consumption, said several policy experts and dispensary staff.

California voters approved Proposition 64 in November 2016, allowing residents over the age of 21 to possess up to one ounce of marijuana and grow up to six plants. The proposition also allows businesses to sell marijuana starting in January.

Steven Davenport, a UCLA alumnus and policy researcher for the RAND Corporation, a think tank based in Santa Monica, said he thinks marijuana prices will rise during its first year of legalization.

Davenport, who has worked on the Liquor and Cannabis Board in the state of Washington, which legalized marijuana in 2012, added he thinks prices will drop once the market stabilizes.

“In Washington, for example, prices started as high as $25 per gram because the state did not start with enough growers and did not have enough supply,” Davenport said.

The black market price for an eighth of an ounce of marijuana in California is about $20, compared to about $50 in dispensaries, according to the California Growers Association. Tax rates on nonmedical cannabis could be as high as 45 percent, which includes a 15 percent statewide excise tax, according to Fitch Ratings.

Davenport said he thinks California does not regulate its medical marijuana market as much as other states, such as Colorado. He added Colorado had a major advantage while transitioning to marijuana legalization because it already had a regulated medical marijuana market.

“California has (historically had) a gray market for medical marijuana, with just sales tax. No one really knows the number of dispensaries, and enforcement depends on different cities,” he said.

For example, there used to be about 1,200 dispensaries in Los Angeles, until new regulations after Proposition 64 passed brought the number down to about 375, Davenport said.

Davenport said he thinks most taxes on marijuana will be on the state level. However, he added he thinks local governments will have a lot of freedom to decide which cannabis products to allow.

Some Westwood medical marijuana dispensary staff said they think tough regulations and higher taxes could hurt small businesses and lead to lower quality products.

Enja Eriksen, manager of a Westwood medical marijuana dispensary called Paradise Collective, said changing regulations and taxes will force the dispensary to raise prices since profit margins for small businesses are already slim, and overhead costs will have to fall on consumers.

“There will be quite a (price) increase, with not as much quality in what customers get,” she said.

Eriksen said she thinks many of the store’s products will not be available next year because they do not comply with new regulations, such as childproof packaging. She added she thinks customers will continue to buy Paradise Collective’s products rather than turning to the black market despite high taxes because they are of higher quality.

Lizzie Rutkevich, a first-year art student, said she thinks UCLA students who thought about going to dispensaries rather than buying marijuana from friends or dealers after legalization may be discouraged by the higher prices.

“The regulations, age restrictions and more specific enforcements will make it harder for certain people to have access and create a larger countermarket,” she said.

Talla Khelghati, a first-year economics student, agreed that students who can’t afford the higher cost will be forced to the black market.

“People return to old habits and buy from dangerous places instead of trusted dispensaries,” she said.

However, Rutkevich thinks dispensaries will remain popular because of their convenience and safety.

“Once the recreational market picks up, the price shouldn’t be significantly higher because it will be mass produced and more available,” Rutkevich said.

 

Share on FacebookTweet about this on TwitterEmail this to someoneShare on Google+Share on Reddit

Comments are supposed to create a forum for thoughtful, respectful community discussion. Please be nice. View our full comments policy here.

  • Duncan20903

    In Colorado authorized vendors sell ounces of top shelf grade cannabis for as low as $160 out the door. That’s $130 for the ounce and $30 of taxes.

  • SILVER GAUNTLET

    The black market will be huge in the under 21 pop since legal MJ can only be sold to over 21 yr olds.Also Calif grows 4x as much weed here as is needed .The extra weed goes to the black market and out of state

    • Publius

      “Black market” sounds much more sinister than it is. The black market will consist of minors obtaining marijuana that is otherwise legal, e.g. product that originated from weed shops. Here in Washington, there’s no longer any such thing as minors getting their weed from some sketchy guy. They get it illegally, in the same manner as they get alcohol. Nothing too scary or complicated.

    • lovingc

      The numbers I have seen it looks like a lot more than 4x The total crop is about 13 million pounds and the recreational need is about 2.5 million pounds. May be not. That looks like 5x. Who knows until it happens.

    • DeeperDish

      Teenagers will always be able to find a way to score marijuana, but the black market for under 21 will be small. The legal market for alcohol is 220 times bigger than the black market for alcohol.

      Legal states still have a black market for marijuana, in part because it’s still illegal nationwide, but also because many cities and counties have banned retail stores. As more cities come to their senses to allow stores, teenagers will find the black market increasingly hard to find.

    • Jackson Shredder

      Well Medical is 18+ but I do agree with you as I will def remain in the black market between my harvests. Why pay taxes when u don’t need to. The prices are going to be too high and it’s better to grow your own and utilize the black market always.