According to a recent report by Reason Foundation, the high taxes levied on state-approved marijuana products as well as the “marijuana deserts,” or localities and municipalities that have banned cannabis sales, have helped the black market to thrive within the state.
Geoffrey Lawrence, the managing director of Reason Foundation, says approximately 80% of the localities in California have enforced bans or some form of restriction on marijuana cultivation and sale. He also says that retail outlets are few and far between for the more rural regions of the state. This makes it hard for residents in these areas to access marijuana from licensed sources. Consequently, illicit suppliers have taken advantage of this situation to meet the demand that cannot be satisfied by regulated companies.
To show how significant this shortage of retail outlets is, Lawrence points out that nearby Oregon has a cannabis retail facility for every 6.1 residents while the more populous California has a licensed outlet for every 29.2 residents. This per capita distribution of marijuana retail outlets creates opportunities for black market operators to fill the gaps left by state-regulated cannabis suppliers.
Law enforcement agencies say that many illegal cannabis grows exist in northern California as well as in southern Oregon. A number of these illicit grows are run by Mexican drug cartels, and there are concerns that these gangs could be using illegal immigrants to work in those cultivation sites.
Reason Foundation is calling on the state government in California to reduce the taxes imposed on marijuana products so that the cost can come down and squeeze black market operators out of the sector. To support this argument, Lawrence says that Oregon imposes 17% as state tax and allows localities to levy an extra 3% or less.
As a result, Oregon doesn’t have as much of a black-market problem as California does, where the state levies a 15% excise tax, 8.5% as sales tax, and several local taxes on cultivation and manufacturing as well as retail and distribution taxes. These numerous taxes make legal cannabis at least 40% more expensive when compared to what is available on the black market.
Once these taxes are reduced, sector players will have a better chance of running profitable enterprises as more people will abandon black market cannabis in favor of legally sourced products.
The report released by Reason Foundation also calls on authorities to look for ways through which local authorities can be encouraged to permit cannabis business activities in order to make marijuana more accessible to those interested in it.
When tax reform is paired with innovations such as the “micro farms” distributed by Advanced Container Technologies Inc. (OTC: ACTX), sector actors in the cannabis industry will have a shorter, more sustainable path to profitable operations.
NOTE TO INVESTORS: The latest news and updates relating to Advanced Container Technologies Inc. (OTC: ACTX) are available in the company’s newsroom at https://cnw.fm/ACTX
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