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Friday, December 14 , 2018, 6:48 pm | Fair 58º


Ron Fink: Pot Cash Cow May Elude Local Communities

When voters passed Proposition 64, local governments saw a pot of gold at the end of the rainbow. Little did they know that every level of government in California wanted their cu,t too.

I voted “no” because I thought it was a bad idea, but I was in the minority.

I suspect voters didn’t read the fine print of the California Marijuana Legalization Initiative. They thought they were just voting to allow them to smoke and grow all the pot they wanted without interference from government, specifically the police agencies.

Boy, were they misled. Buried in the fine print was language that allowed government at all levels to enter their lives in ways they never imagined.

Included were provisions for taxation. Politicians and bureaucrats relish the idea of taxing everything in sight, including the air we breathe, so they couldn’t pass this up.

When the state Assembly considered how to regulate the cannabis industry in the “spirit and intent” of Prop. 64, they concluded a new bureaucracy was needed to oversee commercial sales; included were fees to support the new agency.

I have read the new laws carefully; each new regulation includes many expensive provisions for sellers and users.

Taxes and fees are being assessed at every level from Sacramento to Lompoc, and it is these additions, along with all the recordkeeping, testing and security requirements, that will drive the price to the consumer.

Most jurisdictions have simply banned cannabis sales in their communities, probably because of the difficulty associated with developing local regulations that are acceptable to both industry and the community in general.

On the South Coast, the cities of Goleta and Santa Barbara are still in the rule-making process, and Santa Barbara County has yet to complete its regulation.

In the North County, the Lompoc City Council is the only local government to think it is smart enough to create an adequate program, again telling themselves the taxes they will assess will enrich the General Fund and solve all the city’s budget worries.
But, hold on a minute. Fitch Ratings, a global leader in financial information services with operations in more than 30 countries, has a different analysis of the earnings forecast.

Fitch has concluded that “high taxes may complicate such efforts by diverting in-state sales to the black market."

The Los Angeles Times reported that “California is scheduled to begin issuing licenses to grow, transport and sell medical and recreational marijuana on Jan. 1 and will charge a 15% excise tax, as well as a state cultivation levy of $9.25 per ounce for cannabis flowers and $2.75 per ounce for leaves.

"In addition, local business taxes have been approved by 61 cities and counties ranging from 7.75% to 9.75%,” the paper reports.

You can add fees to process commercial licenses.

Add to this the cost of production and compliance with environmental regulations that apply to agricultural and processing operations and the cost could become much higher than existing illegal, street level sales.

The Wall Street Journal opines that a combined tax rate of 45 percent in some jurisdictions will simply allow the black market to thrive as users seek bargain prices. Thus increasing, not decreasing illegal activities because street sellers won’t have to follow any of the rules or pay taxes.

Police agencies have tried to warn tax-thirsty politicians that the unintended consequences of legalization will cause increased workloads based on experience in other states where legalization has existed for a couple of years, but as in Lompoc, they are ignored as being alarmists.

After following the discussion in Lompoc and elsewhere for the last several months, one thing has become clear, no one knows what will happen.

But cost-conscious consumers always want a good deal. For example, in New York City politicians decided that raising taxes on tobacco would cause people to quit. They did, they quit buying tobacco in New York and went to New Jersey instead.

So, for all of you who thought the government was going to leave you alone and allow you to create huge clouds of “happy smoke," wake up, because the only thing the government is going to do is tax and regulate you at a dizzying rate.

— Ron Fink, a Lompoc resident since 1975, is retired from the aerospace industry and has been active with Lompoc municipal government commissions and committee since 1992, including 12 years on the Lompoc Planning Commission. He is also a voting member of the Santa Barbara County Taxpayers Association. Contact him at [email protected]. Click here to read previous columns. The opinions expressed are his own.

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