We’ve devoted a good bit of attention here to examining the rollout of legalized marijuana nationwide, and specifically the places that appear to be getting it right (Oklahoma, Illinois) and those that have misfired badly (Massachusetts, California). Now it turns out that things in California are perhaps even worse than we thought, which is really saying something.
A recent 60 Minutes report confirmed that three years after legalization, licensed growers and dispensaries are barely scraping by, while the black market is thriving as never before. Legalization, of course, was supposed to eliminate the black market. So what went wrong?
For starters, California’s Prop 64 legalized cannabis statewide, but then gave local municipalities the authority to decide whether licensed businesses are welcome. To date, a whopping 80% have said, “No thanks; not here.”
That absence of a legal distribution system has created a glut of legal marijuana, to the tune of 11 million pounds per year. As in, legal growers are producing 11 million pounds more than the legal market can consume. Needless to say, that state of affairs has severely depressed prices … and profits.
What could be worse? The taxes and fees that create such a high barrier to entry for those who want to participate in the legal market. The CBS report profiles one grower whose costs in taxes, permits and consulting fees over those three years have exceeded $50,000. He has a total of 45 plants.
Red tape? Try not one but three governing bodies, each with its own territorial interests, and 12 – twelve – different types of licenses. If you had gone to the drawing board and said, “Let’s create a situation that’s overloaded with bureaucracy and confusion so we can stunt the growth of legal cannabis to the greatest degree possible,” you couldn’t have done much better than this.
Given all that, it’s pretty predictable that the black market in the Golden State is doing business like never before. And when we say “black market,” we don’t mean just the shady character on the street corner. Unlicensed shops can be found in strip malls all over the state. No permits, no taxes – which can reach 45 percent – and prices that greatly undercut the folks who are trying to do things the legal way.
Illegal growers are pursuing a similar path, sometimes on the same land as legal ones. The widespread decriminalization of cannabis-related offenses is laudable, but it also means these illegal operations have little to fear from the law. For the handful of illicit growers who do go to jail, the crimes are usually related to stealing water or illegal use of pesticides.
Like many other states, California no doubt had the best of intentions for their legalized marijuana rollout. Also like many other states – but worse – the political view of cannabis as a cash cow and the accompanying high taxes, permitting fees and red tape have resulted in a textbook example of the law of unintended consequences. Here’s hoping someone sees the light and starts to turn things around.