July 30, 2021

Legal marijuana unleashes a fiscal war between the cities of California

Legal marijuana unleashes a fiscal war between the cities of California

California is mired in a "fiscal war" over marijuana, in which cities compete fiercely so as not to lose market share just a few months after cannabis becomes legal.

The voters of the most populous state in the United States they approved in a referendum to legalize cannabis for recreational purposes in 2016, a measure that came into effect on January 1, 2018, and since then the municipalities have launched the race to attract business.

Before the marijuana was regularized, the town of Oakland was already an area with strong implementation of the industry, so it has a large number of growers, manufacturers and distributors, who now have to pay 10% of taxes at each stage of the production process.

"Of all the cities in California, Oakland is one of those that have a higher rate of 10%." The effects are already being felt, "Anthony Anthony, a lawyer specialized in the cannabis industry James Anthony, told Efe. Group.

"Businesses leave or plan to leave, and those who continue to bet on Oakland find it harder to obtain financing because investors prefer other locations," said the lawyer on this town of more than 400,000 inhabitants in the San Francisco Bay Area. .

Precisely the residents of Oakland will vote on November 6, coinciding with the elections to the US Congress, whether or not they give authority to the City to lower the tax on marijuana, which has been baptized as Measure V.

The city, known as the home of the Golden State Warriors basketball team and the Oakland Athletics baseball, has a special tax on cannabis markedly superior to that of its neighbors.

San Francisco, which is separated only by a bridge or a journey of less than ten minutes by subway, has no tax on marijuana, and Richmond, in the northern area of ​​the bay, gravel with 5%, the half that Oakland.

Precisely to be more competitive with its neighbors, the municipality of Berkeley, bordering both Richmond and Oakland, reduced the tax from 10 to 5% in February, and Sacramento, the state capital, set it a point below, in the 4 %.

"The current 10% tax is bad for consumers, it benefits the black market – which is much cheaper and still exists even though cannabis has been legalized – and harms businesses because it makes them compete in unequal conditions," Anthony said. .

If the other taxes on sales and those imposed by the state are added to the special tax, the consumer in Oakland ends up paying around 35% in taxes, compared to the 25% paid by someone buying cannabis in neighboring San Francisco.

"The only reasonable rate is one that allows you to compete with your neighbors," the lawyer said, "even if it means not having any special taxes."

Anthony cited the example of Emeryville, another Oakland neighbor who has no special rate for marijuana.

"This type of war has already occurred with taxes on department stores, Emeryville substantially reduced them and took away all the big stores like Target, Ikea and BestBuy, despite having only 10,000 inhabitants compared to Oakland's more than 400,000." he remembered.

According to Anthony, hundreds of Oakland residents go to Emeryville daily to buy furniture and appliances and the economic benefits of these activities remain in the neighboring city, something that also begins to occur in the case of cannabis.


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