Jan 1, 2018 marks a historic time in California’s history. California became the 8th state to legalize recreational marijuana use. California has approved marijuana for medical use since 1996, and according to the Board of Equalization, “…through June 30, 2016, $575,021,347 taxable sales of marijuana were reported to the BOE.” California has realized the lucrative business that marijuana sales generate. 2018 recreational marijuana tax revenue is projected to reach over $1 billion!
$1 billion in additional tax revenue will mostly be felt by the consumer in the form of excise tax and use tax. Starting 2018, there will be another 15% excise tax on all recreational marijuana products. However, if a medical marijuana card is presented upon purchase, the excise tax is not in effect and the consumer will not incur the additional 15% tax.
To understand and rationalize why the high tax on recreational marijuana, we need to look at the cost of enforcing marijuana possession laws. According to an article by the HuffPost, the amount that states will spend enforcing marijuana laws over the next 6 years is estimated at $20 billion. The California Department of Corrections and Rehabilitations estimates that the number of marijuana convictions currently stands at approximately 1,540 and the average cost to house an inmate is $49,000. An economist might agree that a savings of over $75 million will be a good thing for any California resident. So yes, the cost of marijuana will increase in 2018, but in our opinion, the savings to the state and ultimately the average California resident, outweighs the price increase.
Additionally, the state will use the tax revenue in ways that benefits society.
- $10 million will be allocated as a grant to any public university to research and evaluate the implementation and effects of AUMA (Adult use Marijuana Act) and make recommendations to legislatures.
- $3 million will be allocated to Highway Patrol
- $10 million will be allocated to GOBiz- Economic development and job creation
- $2 million to the University of California San Diego Center for Medical Cannabis Research
Tax revenue will also go to Youth education, environmental protection and local government law enforcement. At the end of the day, consumers want a product at a reasonable price and to know that our tax dollars are going towards improving our community.