California Tax Revenue Not As High As Some Predicted
State-legal cannabis users consume less liquor and medications, according to a report, California isn’t fetching as much marijuana tax revenue as anticipated.
Here’s a closer look at some notable developments in the cannabis industry recently...
A study showing that recreational cannabis consumers use less booze, over-the-counter pain drugs and sleep aids is an opportunity for marijuana business executives.
Cannabis business owners who want to capitalize on the information should realize there’s a vast, untapped market of people who aren’t typical marijuana consumers. That includes an older generation curious about cannabis products.
Brett Roper, CEO Medicine Man Technologies.
He advises marijuana business executives to educate consumers that a wide variety of cannabis products are available that can provide similar results.
“You have an opportunity for people who say, ‘I’ve always been curious, but I was afraid to try it because it was illegal, and I didn’t want to get in trouble. I’m a law-abiding person,’” he said.
A smart dispensary or cannabis retail shop owner can help train budtenders to educate consumers who are looking for an alternative to alcohol, sleep aids or pain drugs, Roper said. Just focus on the properties in cannabis that can provide the results these people are seeking.
“They’ll find a product that’s a little less addictive and far easier on your body,” he added.
To Roper, it would seem logical that a law-abiding citizen who is consuming alcohol and prescription sleep medicine would gravitate toward other legal forms of sleep and relaxation supplements.
“There are a lot of folks who have driven between the lines and wouldn’t cross that line,” he said. “What’s happening is you’re finding people who relied on alcohol or pills or some other substance to help dull that pain or make them more comfortable or help them sleep at night.
“Now they have an alternative.”
A taxing situation
News that California’s first-quarter haul of marijuana excise taxes underperformed state government expectations isn’t going to make life easier for the state’s cannabis businesses.
Rather, it’s likely the opposite.
Much of the predicted $175 million that was supposed to materialize by the end of June has already been spoken for in the state budget, said Sacramento-based political consultant Dustin Moore.
Because the state took in only $34 million during the first three months of 2018, there may be a shortfall come July, meaning it will be more difficult to persuade lawmakers to support a tax cut for MJ companies.
Besides, Moore said, there was already political opposition to such a cut. Political heavyweights such as the Service Employees International Union have already said they oppose a cannabis tax reduction.
“That was an uphill battle to begin with,” Moore said. “I don’t want to say that it’s DOA, but certainly after the SEIU (opposition) letter came out, it’s a serious uphill battle.”
Still, he believes California’s tax revenue will increase solidly as the cannabis market progresses, more companies are licensed and the state’s tax collection methods come more fully online.
“Frankly, it’s the difference between carrots and sticks,” said Moore, who helped run California’s Proposition 64 legalization campaign two years ago.
“Right now, there are some carrots in the sense that, if you pay your taxes, at least you’re on the record as having done so.
“But there are no sticks, because there’s no way to enforce upon folks that don’t pay their taxes, because there’s no track and trace.”
Moore said he “would hope that (excise tax revenue) would double” in the second quarter, but he added that a significant increase in tax revenue likely won’t materialize until the third or fourth quarters this year.