New tax rules for legal marijuana which will go into effect January may raise prices but most likely will not reduce marijuana use, said several policy experts and dispensary staff.
Registered voters of California approved Proposition 64 back in November 2016, allowing residents of the sunshine state 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 stated.
For instance, 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 stated he believes the majority of the excess tax 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.a