California considers lower taxes on legal pot to compete with black market

Alarmed that California’s fledgling legal marijuana industry is being undercut by the black market, a group of lawmakers proposed Thursday to reduce state taxes for three years on growing and selling cannabis to allow licensed sellers to get on their feet.

With many California license holders claiming they can’t compete because of high state and local taxes, the new legislation would cut the state excise tax from 15% to 11% and suspend a cultivation tax that charges $148 per pound.

“Criminals do not pay business taxes, ensure consumers are 21 and over, obtain licenses or follow product safety regulations,” said Assemblyman Tom Lackey (R-Palmdale), one of five legislators pushing the bill. “We need to give legal businesses some temporary tax relief so they do not continue to be undercut by the black market.”

California voters approved the 15% tax when they passed Proposition 64 in 2016, allowing legal growing, distribution and sales of marijuana for recreational use and requiring state licenses for the continued sale of pot for medical purposes. License holders began growing and selling pot on Jan. 1. …

Click here to read the full article from the L.A. Times

Legislation would make it easier to clear pot convictions from criminal record in California

Buds are removed from a container at the "Oregon's Finest" medical marijuana dispensary in Portland, Oregon April 8, 2014. Over 20 Oregon cities and counties are moving to temporarily ban medical marijuana dispensaries ahead of a May deadline, reflecting a divide between liberal Portland and more conservative rural areas wary about allowing medical weed. Portland, Oregon's largest city, already has a number of medical marijuana clinics and has not moved to ban them. Picture taken April 8, 2014.  REUTERS/Steve Dipaola (UNITED STATES - Tags: DRUGS SOCIETY POLITICS HEALTH) - RTR3KMHE

Recently proposed legislation would make it easier for Californians to have their pot convictions wiped away, in just the latest drug policy development following marijuana legalization on a state level earlier this year.

Under Proposition 64, California residents can petition to have certain drug convictions overturned – but Assembly Bill 1793, introduced by Rob Bonta, D-Oakland, in January, would make it even easier, by automatically clearing the records of those convicted of crimes that are now legal under the new law.

“Let’s be honest, navigating the legal system bureaucracy can be costly and time-consuming,” Bonta told reporters last month in Sacramento. “[It] will give people the fresh start to which they are legally entitled and allow them to move on with their lives.”

Offenses that can now be wiped away include past convictions for possessing up to an ounce of weed and growing between 1-6 plants for personal use, which are both now legal.

However, Bonta has not specified what the cost of such a move would be, as it would require courts to identity who’s eligible and then notify those persons of the changes.

But the proposal is in line with the positions of district attorneys in San Francisco and San Diego, who have said their offices will go through case files themselves so that residents don’t have to go through the petition process.

For example, in San Francisco, pot-related felony and misdemeanors dating back to 1975 will be cleared or re-classified based on the new state law. The city so far has identified 8,000 such cases and San Diego has identified around 5,000.

“Long ago we lost our ability to distinguish the dangerous from the nuisance, and it has broken our pocket books, the fabric of our communities, and we are no safer for it,” San Francisco D.A. George Gascon reportedly said late last month. “A criminal conviction can be a barrier to employment, housing and other benefits, so instead of waiting for the community to take action, we’re taking action for the community.”

Proponents of the move argue that it’s a necessary part of a legalization framework, as past convictions can be a hurdle to finding a job or obtaining certain professional licenses.

“This isn’t just an urgent issue of social justice here in California, it’s a model for the rest of the nation,” Lt Gov. and gubernatorial frontrunner Gavin Newsom added.

However, not all cities are taking this approach, as Los Angeles District Attorney Jackie Lacey says the city will instead have residents follow the petition process already in place.

“The process also allows people most affected by these convictions to pro-actively petition the court for relief and move to the head of the line – rather than wait for my office to go through tens of thousands of case files,” Lacey said in a statement.

As of September 2017, around 5,000 Californians have petitioned to have marijuana convictions expunged or reclassified.

This article was originally published by CalWatchdog.com

California looks to Trump administration for help on marijuana banking

Buds are removed from a container at the "Oregon's Finest" medical marijuana dispensary in Portland, Oregon April 8, 2014. Over 20 Oregon cities and counties are moving to temporarily ban medical marijuana dispensaries ahead of a May deadline, reflecting a divide between liberal Portland and more conservative rural areas wary about allowing medical weed. Portland, Oregon's largest city, already has a number of medical marijuana clinics and has not moved to ban them. Picture taken April 8, 2014. REUTERS/Steve Dipaola (UNITED STATES - Tags: DRUGS SOCIETY POLITICS HEALTH) - RTR3KMHE

With the legal sale of recreational marijuana a week away, local governments across California have adopted policies on where and when permitted legal sellers can operate, following the ground rules set up by Proposition 64 – the November 2016 state ballot measure legalizing pot for recreational use beginning Jan. 1, 2018.

But despite more than 13 months of lead time, state officials still haven’t figured out how to deal with a crucial problem: the fact that federally regulated banks can’t accept deposits or have any financial relationship with marijuana vendors or growers, given that pot sales and consumption remain illegal under federal law.

Cash-only medical marijuana dispensaries authorized by a 1996 ballot measure have long been plagued by armed robberies. With recreational pot sales expected to be a multibillion-dollar industry, pot-related crime could skyrocket.

Two separate proposals have emerged after what state officials say are months of discussions.

One under consideration by Gov. Jerry Brown’s administration seems a long shot given that it relies on the cooperation of the Trump administration – specifically Attorney General Jeff Sessions, who has opposed individual states’ efforts to legalize marijuana for recreational use.

The Los Angeles Times recently reported that the state had met with 65 banks and credit unions, as well as with federal regulators, about having one bank in California established as a clearinghouse for all marijuana-related accounts of various banks throughout the state. The “central correspondent” bank would process all transactions involving pot dollars.

Seeking assist from federal government after suing it 24 times

Brown administration officials appeared hopeful that this concept would go over well with federal regulators because, at least in theory, it would make it easier to keep close track of marijuana industry finances, and to spot suspicious payments or transfers of funds.

The problem for California is that this proposal is built on the presumption that the federal government wants to help the state – which has already sued the Trump administration 24 times. While federal regulators have met with state officials on the pot-banking issue, the final decision on whether to cooperate is up to Sessions. At a Nov. 29 press conference, he said his office was taking a hard look at rolling back Obama administration rules that let states allow recreational marijuana after basic public safety and health standards were met.

“It’s my view that the use of marijuana is detrimental, and we should not give encouragement in any way to it, and it represents a federal violation, which is in the law and is subject to being enforced,” Sessions said, according to the McClatchy News Service. “We are working our way through to a rational policy, but I don’t want to suggest in any way that this department believes that marijuana is harmless and people should not avoid it.”

Chiang: Consider setting up a state bank for pot transactions

The second proposal – touted by state Treasurer John Chiang at a Nov. 7 news conference – is to have the state study the feasibility of opening its own bank to deal with marijuana financial transactions. That was based on the recommendations of Chiang’s cannabis bank working group.

The group’s 32-page report also suggested California work with other states in setting up a network of such institutions. But the report noted the many obstacles to establishing such a bank, including the likelihood that it ultimately would still be subject to federal regulation and thus to Sessions’ objections.

Chiang told reporters at his November news conference that “a definitive, bulletproof solution will remain elusive” without changes in federal banking laws.

But the 2018 gubernatorial candidate said that “is not an excuse for inaction.”

This article was originally published by CalWatchdog.com

California’s marijuana black market could remain huge

Buds are removed from a container at the "Oregon's Finest" medical marijuana dispensary in Portland, Oregon April 8, 2014. Over 20 Oregon cities and counties are moving to temporarily ban medical marijuana dispensaries ahead of a May deadline, reflecting a divide between liberal Portland and more conservative rural areas wary about allowing medical weed. Portland, Oregon's largest city, already has a number of medical marijuana clinics and has not moved to ban them. Picture taken April 8, 2014. REUTERS/Steve Dipaola (UNITED STATES - Tags: DRUGS SOCIETY POLITICS HEALTH) - RTR3KMHE

Legalizing marijuana, California voters were told last year, would create a “safe, legal and comprehensive system” allowing adults to consume the drug while keeping it out of the hands of children. Marijuana would be sold in highly regulated stores, the Proposition 64 campaign promised, and California would gain new tax revenue by bringing the cannabis marketplace “out into the open.”

Voters overwhelmingly bought the message, with 57 percent approving Proposition 64. But as state regulators prepare to begin offering licenses to marijuana businesses on Jan. 1, it turns out that a huge portion of the state’s weed is likely to remain on the black market.

That’s because California grows a lot more pot than its residents consume, and Prop. 64 only makes marijuana legal within the state’s borders. It also didn’t give an automatic seal of approval to every cannabis grower. Those who want to sell legally must be licensed by the state and comply with detailed rules that require testing plants, labeling packages and tracking marijuana as it moves from farm to bong.

Exactly how much cannabis circulates in California is unknown because most marijuana grows — and purchases — have been illegal for so long. But economists hired by the state government estimate that California farms produce about 13.5 million pounds of cannabis each year, while state residents annually consume about 2.5 million pounds. That leaves 11 million pounds of pot that likely flows out of California illegally, according to the economic report commissioned by the California Department of Food and Agriculture, which regulates cannabis farmers. Other analyses have similarly found that roughly 80 percent of California-grown marijuana leaves the state.

Even the 2.5 million pounds of marijuana consumed within California won’t all be purchased through state-sanctioned shops when they open; the economists predict about half of it will probably be sold illegally.

“Those sales opportunities will still be there,” said Hezekiah Allen, executive director of the California Growers Association, which represents more than 1,000 marijuana businesses in the state.

Allen surveyed his members recently and found that 85 percent hope to get a license to sell marijuana legally under Prop. 64. But many fear they won’t be able to because some local governments will limit or ban pot businesses, or because prices could drop too low in the regulated market. And if they can’t sell weed legally, 40 percent of the respondents to Allen’s survey said they would continue operating the way they always have: on the black market.

Some long-time cannabis growers will likely go out of business, Allen said. But, “at the end of the day, a lot of businesses in general may stay outside of the regulated market.”

That means that despite the passage of Prop. 64, California cops will still have plenty of work going after illicit cannabis operations.

“You’re going to see robust enforcement efforts to prevent California from becoming the staging area for drug trafficking nationwide,” said John Lovell, a lobbyist for the California Narcotics Officers Association, which opposed the ballot measure.

A spokesman for the Prop. 64 campaign said the measure wasn’t intended to abolish all criminalization of marijuana but instead to allow opportunities for “operators who want to be responsible and compliant.”

“No one ever promised to completely eliminate the black market — that’s like promising security cameras will completely eliminate shoplifting — but it will be significantly reduced,” spokesman Jason Kinney said by email.

He added that the state’s estimates of marijuana supply and demand are unreliable because the legal marketplace created by Prop. 64 won’t begin to roll out until next year. And he pointed out that some of the tax dollars generated by legal marijuana sales will go toward cracking down on illicit operations.

State officials said they are encouraging marijuana businesses to follow the rules and become part of the regulated system, while also planning how to go after those that remain in the black market.

“We are developing a formal complaint system that will allow anyone to report illegal grows or other concerns, and then we will forward those potential issues to the appropriate (law enforcement) agencies,” said Rebecca Forée, a spokeswoman for the state’s cannabis cultivation licensing office within the Department of Food and Agriculture.

Lori Ajax, chief of the state’s Bureau of Cannabis Control, said her agency is trying to entice marijuana businesses to go legit by crafting rules that aren’t too difficult for them to live by.

“It’s making sure those people who want to be in the regulated market, that we have made a path for them, we’re not making our regulations so difficult and hard to comply with that you’re discouraging people,” Ajax said.

“First, we’ve got to get those folks in there and… then see what comes after that with enforcement.”

eporter for CALmatters

Legalized Marijuana Edges Closer to Reality

Buds are removed from a container at the "Oregon's Finest" medical marijuana dispensary in Portland, Oregon April 8, 2014. Over 20 Oregon cities and counties are moving to temporarily ban medical marijuana dispensaries ahead of a May deadline, reflecting a divide between liberal Portland and more conservative rural areas wary about allowing medical weed. Portland, Oregon's largest city, already has a number of medical marijuana clinics and has not moved to ban them. Picture taken April 8, 2014. REUTERS/Steve Dipaola (UNITED STATES - Tags: DRUGS SOCIETY POLITICS HEALTH) - RTR3KMHE

Despite a mixed bag of support for the many propositions on California’s voluminous ballot, legalized recreational in-state marijuana use appears to be headed from far-off dream to dawning reality.

“Last month, the two most prestigious California public opinion outfits — the Field Research Corporation and Public Policy Institute of California (PPIC) — both pegged support for Proposition 64 at 60 percent,” Ed Kilgore noted at New York Magazine. “Field nostalgically noted that its first poll of California on the subject, in 1969, showed only 13 percent support for legalization. A new PPIC survey in October showed legal weed pulling a mere 55 percent with 38 percent opposed. That’s still a 17-point margin. Indeed, there has only been one bad poll for Proposition 64.”

A decisive year

Although California has long been forced into the role of bellwether state by policy activists hoping to go national with Golden State victories, broader change in a pro-pot direction has been largely recognized as nearly inevitable given the sheer size of the market for pot that Prop. 64 would legitimize and expand. “Californians are on the verge of tripling the number of American adults who can legally acquire marijuana without interference from doctors, dealers or cops,” Reason magazine’s Matt Welch observed at the Los Angeles Times. “If Maine and Nevada voters do likewise, as seems probable, that would further expand the zone of recreational freedom to cover nearly one-fifth of the U.S. population.”

Pro-pot advocates have cast a broad net this election season. “Voters in five states — Arizona, California, Maine, Massachusetts and Nevada — will decide whether to legalize recreational marijuana for adults,” as NBC News reported. “Medical marijuana is on the ballot in Arkansas, Florida, Montana and North Dakota.”

“Two national surveys released in mid-October confirm that, with the Pew Research Center revealing that 57 percent of U.S. adults say the use of marijuana should be made legal — while 60 percent were opposed a decade ago. The latest Gallup Poll showed that support for legalizing marijuana is at 60 percent, the highest ever recorded in this survey. After Colorado and Oregon became the first states to allow the recreational use of pot, in 2013, support for legalization reached a majority for the first time.”

Business first

Entrepreneurs have already begun a rush to fill current and perceived appetites for a new generation of recreational weed products and services. “Startups are cropping up throughout the Bay Area that put a signature Valley spin on the age-old practice of selling marijuana, offering sleek on-demand delivery apps for users and high-tech software for growers and dispensaries,” the San Jose Mercury News recently noted. “The business models are risky — marijuana is illegal under federal law and stigma around the drug prevents cannabis startups from scoring funding from many major investors. But with recent polls suggesting Californians are poised to expand marijuana consumption beyond medical use, experts expect cash to pour into the industry.”

Already, changes to state law governing how licenses are granted to new marijuana businesses have helped open the floodgates. “New pot businesses have been springing up under medical marijuana licensing rules signed into law by Gov. Jerry Brown last year,” the Sacramento Bee reported.

Jump ball

Analysts have remained divided, however, on the partisan implications of legalization. While many traditional Republican critics have suggested that more permissive drug laws are of a piece with an expansive entitlement state, libertarian supporters like Welch have countered that more free-market innovations are likely to follow in Prop. 64’s wake. “What’s the 2016 equivalent of medical marijuana shops?” he asked. “Charter schools come quickly to mind. Wherever the one size is not fitting all to the end user’s satisfaction, there is an opportunity for governmental bodies to allow for some real or metaphorical outside lab work. Beware any entity that would prematurely close such experiments down.”

This piece was originally published by CalWatchdog.com