A group of licensed cannabis business owners rallied on the steps of the California capitol on Thursday to bring attention to the impact high cannabis taxes have on independent entrepreneurs. The demonstration, which was held in response to the proposed state budget released by Governor Gavin Newsom last month, was organized by Supernova Women, an Oakland nonprofit that works to create opportunities for Black and Brown people in the cannabis industry.
The rally featured more than fifty cannabis business owners, patients, and policymakers who are Black, Indigenous, or people of color (BIPOC) and gathered to call for several changes to the state’s cannabis regulations, including eliminating the cannabis excise tax for licensed social equity businesses.
“I have been in business 3 years and we have paid half a million dollars in excise taxes alone, and this is in addition to a state excise tax and a 4% city tax,” said Maisha Bahati, founder and owner of Sacramento licensed cannabis retailer Crystal Nugs. “This business has to survive. Failure is not an option for me. I’ve put everything I have into this business and being a social equity business taxed at 40% is killing me and my dreams of creating generational wealth for my children.”
Budget Proposal Temporarily Reduces Pot Taxes
On May 13, Newsom released a budget proposal for the 2022-2023 fiscal year that included temporary tax relief for licensed cannabis businesses. Under the proposal, Proposition 64, the 2016 ballot measure that legalized recreational pot in California, would be amended to eliminate the cultivation tax paid by cannabis growers.
But those attending the rally in Sacramento on Thursday say the proposed tax relief does not go far enough and are calling on Newsom and state legislators to take further action before the budget deadline on July 1. The proposal calls for the state to repeal the cannabis excise tax for social equity businesses, reduce the cannabis excise tax to 5% for all other companies, and codify a statewide definition of social equity to establish eligibility for the state excise tax exemption.
“Governor Newsom promoted Prop. 64 less as an opportunity for tax revenue and more as a historical opportunity for racial and social justice and economic empowerment—to remedy the damage of a drug war that had disproportionately criminalized Blacks and Latinos,” Amber Senter, rally organizer and executive director of Supernova Women, explained in a statement before the event.
“And yet five years later, California’s Black and Brown cannabis operators, many of whom voted for Newsom not once but twice, are literally sitting on the brink of extinction, due to onerous state taxes, while the Governor sits on a $100B surplus,” Senter continued. “Where is the racial and social justice in that? Without meaningful tax reform NOW, California’s few remaining BIPOC cannabis operators and social equity businesses will not survive, and the communities and patients they serve will not be able to access affordable and safe cannabis. This is a major health crisis today and a missed economic opportunity for tomorrow.”
Two Bills Would Provide Cannabis Tax Relief in California
In a video released last week, state Senator Steven Bradford expressed his support for the goals of Thursday’s rally. Bradford is the sponsor of two bills to provide tax relief to cannabis businesses and their owners, including Senate Bill 1281, which would eliminate the cultivation tax and reduce the cannabis excise tax from 15% to 5%. Separate legislation, Senate Bill 1293, would allow a $10,000 tax credit against the Personal Income and Corporation Tax for social equity applicants and licensees.
“Without meaningful changes to California’s cannabis tax policy, the industry is destined for failure, especially equity cannabis operators who are operating on a very thin margin,” Bradford said in the video posted online.
The demonstrators at Thursday’s rally are also seeking changes to the social equity provisions in California. Under state law, social equity programs, which are presently governed by local jurisdictions, are not permitted to consider race or ethnicity as eligibility criteria. Rally organizers recommend a new statewide definition establishing eligibility for businesses with at least 51% ownership by someone who has lived for at least five years in a low-income community disproportionately impacted by the War on Drugs or by a person with an immediate family member who has an arrest or conviction for a pot-related offense.
“In 2020, 75% of cannabis-related arrests in Los Angeles were Blacks and Latinos, according to LAPD records,” said Whitney Beatty, CEO of L.A. weed speakeasy Josephine & Billie’s. “With Los Angeles’ majority-minority population, L.A. alone could help rewrite our state’s recent history of white operators dominating an industry that has physically, emotionally, psychologically, and economically imprisoned so many BIPOC people… but not without true tax reform at the State level that protects our vulnerable social equity operators and BIPOC patients.”