Get ready for the collapse of California as we know it.
There is a member of the entrenched majority party in Sacramento channeling Republicans.
No, it’s not the guy on the “This is Gavin Newsom” podcast.
He’s just conversing, not converting.
So what is the earth shattering political development?
A Democrat in the Assembly wants to reduce taxes to prevent businesses from going under.
Technically, Matt Haney who represents San Francisco, wants to suspend an increase in a state excise tax that is scheduled to go from 15 percent to 19 percent in July.
And the business that Haney wants to save are legal cannabis dispensaries.
The legal pot industry in California is struggling.
Well, not all of it.
Between the excise tax and sales tax, Sacramento rakes in more than $1 billion a year in taxes on annual sales coming in at right around $4.9 billion based on 2023 cannabis transactions tracked by the state.
The argument Haney offers is the legal cannabis industry in California is dying because of the tax burden imposed on it by Sacramento.
Dying? No.
Oversaturated due to rosy projections that the illegal marijuana market would collapse like moonshining did after the end of Prohibition? Yes.
Haney points to other states where there are lower taxes and less hassle to get government approval to sell legal pot that have what he sees as much healthier legal cannabis industries.
Strange, that sounds eerily like the same argument almost every business from A to Z makes when it comes to California undermining the viability of doing business in the state when it comes to excess regulation and heavy taxation.
But then again, it’s OK to fawn over the virtues of the California government propping up a chosen concern such as cannabis sales than reducing excise tax on liquor and cigarettes or, heaven forbid, rolling back the overall tax hammer on small businesses.
Small businesses are exactly what this is all about.
The concerns screaming for the cannabis tax break are the little guys.
These are not those operating multiple locations with owners that have survived the ups and down of markets subject to taxes and regulations before entering the legal cannabis market was created as opposed to the Wild West world of the black market.
Rest assured, they are just biding their time before market dynamics skewed by taxes and regulations thin the number of little guys just like it does in other segments of the economy subject to taxes and regulations.
There was always the undeniable fact that the black market wouldn’t collapse once cannabis was legalized despite all of the hype by those behind the successful ballot measure.
They are many of the same people now lobbying Sacramento for a cannabis tax break.
There is a price point for many cannabis buyers where they will stick with the black market whether it is a low-level small grow by acquaintances or large-scale cartel operations.
They are not the ones flocking to legal stores.
And any resistance to the “buying pot in an alley” that may have had to do with the potential for draconian legal consequences no longer exists.
So what you really have in California is probably a $5 billion to $6 billion legal cannabis market once it fully matures.
It is something Manteca leaders might want to keep in mind to resist any pressure for years to come to issue a fourth dispensary permit. Keeping the three dispensaries that Manteca will have viable to fulfill the promise of their “revenue sharing agreements” with the city and community is in everyone’s best interest.
Keep in mind there is a sustainable market for those concerns that can absorb the 4 percent increase in the state cannabis excise tax so they don’t chase off customers.
It is clear those legal pot stores that are able to absorb any excise tax increase and keep production/business costs low will be able to peel off the legal market from competitors in areas whether there is more than one licensed dispensary.
It’s how things work for other retail businesses.
You’ll notice Haney et al aren’t looking for ways to help struggling concerns such as JoAnn Fabrics and JC Penney with their state tax obligations to help them stay in business.
The legal marijuana market is viable.
The thriving dispensaries in the area have customers that skew toward being older and have larger household incomes for the most part than those buying “on the street.”
And the locations that attract the core of the legal cannabis business have the “upscale” interior feel of places like Off the Charts in Manteca, Cookies in Modesto, and X1 in Tracy.
That’s opposed to some concerns you can find in aging, rougher looking storefronts in older struggling Modesto commercial areas that have interiors that match.
Just like Target et al well know, presentation is a big part of the retail game.
But so is the fact that what you buy in California at a legal cannabis dispensary has been tested to assure the absence of harmful chemicals and is marketed in such a manner that notes the potency of the product.
Those forking out the $5 billion or so a year in California are doing so because of all the aforementioned without price, per se, being the absolute driving point.
Haney is likely savvy enough to recognize that.
And he is also savvy enough to hijack what Republicans in California have used to apply political pressure when needed, namely the state is “taxing-and-regulating-business-to-death” card.
It is true, to a degree, but it is an extremely slow death.
And for those that survive the maladies of heavy regulation and the high taxes Haney is worried about when it comes to cannabis, the pain they endure in California can have very lucrative results.
It is against that background that Haney, with a straight face, needs to convince the majority of Democrats in the Legislature that cannabis deserves a tax break but no one else does.
Perhaps the researchers are right.
Too much inhaling of cannabis can cloud one’s judgment.
This column is the opinion of editor, Dennis Wyatt, and does not necessarily represent the opinions of The Bulletin or 209 Multimedia. He can be reached at dwyatt@mantecabulletin.com
