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Strict Regulations, Choking The Marijuana Industry?

California voters approved the legalization of recreational marijuana use in November, and now regulators are hard at work formulating the new rules and fees to be imposed.

There is apparently some significant uncertainty, however, as to whether the regulations will soon be ready to go by next year, when the other regulations and the brand new licensing system for the sale of marijuana are supposed to go into effect.

“Being blunt, there’s absolutely no way in which the state of California can meet all of the deadlines before we go live on January 1, 2018,” state Sen. Mike McGuire, D-Healdsburg, who represents several Northern California counties in prime marijuana-growing country, told the Sacramento Bee. “We’re assembling the regulatory system for a multi-billion-dollar industry from scratch.”

There’s good reason behind doubt. After all, though voters passed Proposition 215 to legalize medical marijuana|cannabis back in 1996, the Legislature didn’t set up the first all-inclusive state licensing system until 2015.

And also the state has an extensive list of regulatory schemes to implement. Along with the licensing system, it’s going to developing regulations covering everything from taxation to growing to testing to advertising to packaging to distribution to delivery to tracking products from production to sale, and likely considerably more.

The state has been developing regulations since 2015, though, plus it can draw upon the examples of several other states that have legalized recreational marijuana. It should also learn from their mistakes, and among the largest blunders has been to tax and regulate marijuana at excessive manner.

In a recent column for, J.D. Tuccille explains how the black market for recreational marijuana in Colorado has continued to flourish despite legalization due to excessive state and local taxes and expensive regulatory requirements. This has pushed the legal market price for marijuana about 33% higher compared to the black market price in Denver, based on a PBS report. In a nutshell, Tuccille maintains,“taxes are so high and regulations so burdensome that they make legal marijuana uncompetitive.”

This ruins one of of the main advantages of legalization: removing quality control, the crime and other issues due to the black market.

The risk is that California is apparently ignoring fundamental economics and heading down precisely the same course. Under Proposition 64, a 15% retail excise tax will be imposed by California on both medical and recreational marijuana products. Additionally, there are growing taxes on each ounce of dried marijuana blossoms and leaves. In addition to these, and state and local sales taxes, which average about 8%, are charged on non-medical products.

And that doesn’t even account for the regulatory fees, which Prop. 64 requires licensing bureaus to charge in order to cover their regulatory costs.

It really is an extremely welcome development that we will no longer be locking up individuals at taxpayers expense and ruining families and career prospects for the victimless crime of putting a substance like marijuana into one’s own body, but a lot of public safety and economic problem will stay if the state cannot resist the impulse to impose so many burdensome taxes and regulations that it chokes off the legal market and perpetuates the black market.

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