Federal law legalizing marijuana would help, not hurt, illicit market – Chicago Sun-Times | Region & Cash

Over the next year, California officials said last week, the state expects to seize “more than $1 billion worth of illegal cannabis products.” The announcement came a few weeks after the US Department of Justice boasted guilty pleas from 11 unlicensed California marijuana dealers who had been caught with the help of state and local law enforcement.

The ongoing war on weed in California, which allegedly legalized marijuana in 2016, reflects a conspicuous failure to replace black marketers with state-licensed vendors, a plan doomed by high taxes, local prohibitions, and over-regulation. Judging by the marijuana legalization bill he introduced last week, Senate Majority Leader Chuck Schumer (DN.Y.) learned nothing from the experience.

Six years after California voters legalized recreational marijuana, unauthorized suppliers still make up between two-thirds and three-quarters of illegal suppliers’ sales: Taxes are too high.

Geoff Lawrence, executive director of drug policy for the foundation, noted that California’s effective tax rate ranged from $42 to $90 per ounce, depending on jurisdiction, compared to an estimated wholesale production cost of $35 per ounce. The corresponding prices in Colorado and Oregon, both of which have been more successful in ousting the black market, are around $33 and $21, respectively.

Despite modest tax breaks approved this year, legal marijuana remains overpriced in California. It’s also inconvenient to shop in much of the state, Lawrence notes, thanks to local sales bans that have created “massive cannabis deserts” where “consumers don’t have access to a legal retailer within a reasonable distance of their homes.”

Legal sellers also have to deal with onerous licensing requirements and regulations. Dale Gieringer, California director of the National Organization for the Reform of Marijuana Laws, says these rules help explain why legal marijuana prices are much higher than he expected.

“It turned out that I had grossly underestimated the cost of the regulations imposed by the new law,” writes Gieringer in an introduction to the Reason Foundation report. “In addition to state and local royalties, there were detailed rules governing cultivation, retail, transportation, manufacture, testing, siting, ownership, safety, storage, on-site consumption, wholesale distribution, seed-to-sale tracking, waste disposal, labeling, packaging, Environmental sustainability, water consumption, etc. ad nauseam.”

Despite years of complaining about these barriers, Schumer decided the cannabis industry needed themmoretaxes and regulations. Its 296-page Cannabis Administration and Opportunity Act, co-sponsored by Sens. Ron Wyden (D-Ore.) and Cory Booker (DN.J.), includes 52 pages dealing with taxation and 71 pages that impose new regulations.

Schumer’s bill provides for a federal excise tax that starts at 10% and rises to 25% by the fifth year, in addition to often high state and local taxes. The bill implicitly recognizes the counterproductive effect of these levies and would halve the tax rates for companies with revenues below certain thresholds.

Schumer wants to mandate the Food and Drug Administration (FDA) to register marijuana companies, set product standards, establish labeling requirements, monitor “adulterate” and “mislabeled” products, regulate advertising and promotions, and impose “sales and distribution restrictions.” . In addition to imposing specific rules, such as a statewide minimum purchase age of 21 and a ban on adding flavorings to cannabis-vaping products, the bill would authorize the FDA to impose any restrictions it deems “appropriate to protect public health.” .

Given the FDA’s dubious sense of what protecting public health means in other areas, like regulating tobacco and nicotine vaporization products, that’s a pretty scary clause. As in these contexts, the arbitrary rules the agency invents will inevitably limit consumer choice and help perpetuate the black market.

“By not acting,” says Wyden, “the federal government is empowering the illicit cannabis market.” That’s exactly what the taxes and regulations in this bill would do.

Jacob Sullum is Senior Editor of Reason magazine.

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