For every dollar you spend on cannabis in California, you may have to pay another 35 cents to the government.
The tax man’s grab on ganja proceeds has come into full focus since legal sales started in January, and the sticker shock over the price of pot has filled social media with a mix of outrage and confusion over just what’s driving up the cost of cannabis.
While marijuana taxes stand alone in the world of so-called “sin taxes” because they vary among cities and counties, an analysis by this news organization found the cumulative tax on legal weed is more than triple the tax on wine and beer, which is typically about a dime on the dollar. For cigarettes, on the other hand, the total tax rate is more than 80 percent.
Why are these guilty pleasures taxed at such vastly different rates?
In California’s grand experiment with cannabis legalization, finding that perfect “Goldilocks” zone for taxes has fueled the latest debate: Is 35 cents on the dollar too low or too high? If it’s too low, it will drive up use by youth and drive down local governments’ incentive to allow marijuana businesses to operate in their communities. If it’s too high, the whole industry will just stay in the black market — and legalization will fail.
“We were looking at the opportunity with marijuana legalization to create better public policy,” said Tamar Todd of the Drug Policy Alliance, who helped craft Proposition 64, which legalized weed and set taxes.
As tax rates go up, consumption goes down. But there’s still a thriving black market in cannabis. While weed taxes must be high enough to create social change, they can’t risk driving people away to an illegal product.
Weed, alcohol and tobacco incur the same sales tax rate of 7.5 to 9.5 percent depending on where you live.
The big difference is state excise taxes — those special taxes placed on particular commodities in addition to the sales tax:
• Cannabis is taxed at 15 percent.
• Wine, on average, is taxed at about 0.25 percent.
• Beer, on average, is taxed at about 1.5 percent.
• Tobacco, on average, is taxed at more than a whopping 60 percent.