Marijuana

California Is Taxing the Hell Out of Pot, but Washington Is Even Greedier

Alaska has the lowest taxes on recreational marijuana.

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JZS

Marijuana merchants in California, who began legally serving recreational customers on Monday, complain that they are overtaxed, and they have a point. Of the eight states that have legalized marijuana for nonmedical use, California has the second highest total taxes, beaten only by Washington, where legal recreational sales began in 2014. Alaska, where state-licensed pot shops first opened for business in 2016, has the lowest taxes (although not the lowest prices).

Here is a state-by-state breakdown of recreational marijuana taxes, from lowest to highest. To estimate the impact of taxes imposed at the wholesale level, I use a typical pretax retail price for an eighth of an ounce, as advertised by dispensaries in each state.

ALASKA

Recreational sales began: October 1, 2016

Relevant taxes: $50 per ounce on sales by growers, plus local sales taxes ranging from zero in Anchorage to 7.5 percent in Homer

Upshot: The wholesale tax adds $6.25 to the price of an eighth. Based on a pretax retail price of $60 (legal marijuana is expensive in Alaska), the 5 percent sales tax in Juneau would make the final price $63 and the total effective tax rate about 17 percent. In Anchorage, which has no sales tax, the rate would be 12 percent.

OREGON

Recreational sales began: October 1, 2015

Relevant taxes: 17 percent state marijuana tax collected by retailers, plus local marijuana taxes (up to 3 percent); no general sales tax

Upshot: Marijuana taxes in cities such as Portland, Eugene, and Salem total 20 percent.

MASSACHUSETTS

Recreational sales begin: mid-2018

Relevant taxes: 10.75 percent excise tax collected by retailers, along with the 6.25 percent state sales tax and a local marijuana tax of up to 3 percent

Upshot: As in Oregon, taxes in major cities probably will total 20 percent.

NEVADA

Recreational sales began: July 1, 2017

Relevant taxes: 15 percent tax on sales by growers, 10 percent retail excise tax, 4.6 percent state sales tax, and local sales tax

Upshot: Based on a wholesale marijuana price of $2,300 per pound of buds, the first tax adds $2.70 to the cost of an eighth. Assuming a pretax retail price of $60, the final price would be $70.95 in Las Vegas, where the local sales tax is 3.65 percent. The total effective tax rate would be 24 percent.

MAINE

Recreational sales begin: unknown

Relevant taxes: 20 percent state tax on retail marijuana sales (proposed), plus 5.5 percent general state sales tax

Upshot: Assuming the proposed tax is enacted, the total tax rate will be 25.5 percent.

COLORADO

Recreational sales began: January 1, 2014

Relevant taxes: 15 percent excise tax on sales by growers, 15 percent marijuana sales tax, local marijuana taxes, and local sales taxes; recreational marijuana has been exempt from the general state sales tax since July

Upshot: Based on a wholesale marijuana price of $1,300 per pound, the excise tax adds $1.52 to the cost of an eighth. Assuming a pretax retail price of $30, the final price would be $36.65 in Denver, where the local marijuana tax is 3.5 percent and the local sales tax is 3.65 percent. The total effective tax rate would be 29 percent.

CALIFORNIA

Recreational sales began: January 1, 2018

Relevant taxes: $9.25 per ounce sold by growers, 15 percent excise tax collected by retailers, local marijuana taxes, 6 percent state sales tax, and local sales taxes

Upshot: The wholesale tax adds $1.16 to the cost of an eighth. Based on a pretax retail price of $50, the final price would be $67.10 in Oakland, where the local marijuana tax is 10 percent and the local sales tax is 3.25 percent. The total effective tax rate would be 37 percent.

WASHINGTON

Recreational sales began: July 1, 2014

Relevant taxes: 37 percent state excise tax collected by retailers, 6.5 percent state sales tax, and local sales tax

Upshot: In Seattle, where the local sales tax is 3.6 percent, the total tax rate is 47.1 percent.

High marijuana taxes make it harder for state-licensed merchants to compete with black-market dealers, who also escape the regulatory burden imposed on legal businesses. In an interview with The New York Times last fall, Tawnie Logan, who chairs the board of the California Growers Association, estimated that an eighth goes for $20 on the black market in her state. At the Harborside dispensary in Oakland, by contrast, the price ranges from $40 to $55, and that's before the retail taxes, which together add 34.25 percent.

"I don't think that the current tax rate for cannabis in California is sustainable," Harborside CEO Steve DeAngelo told KPIX, the CBS station in San Francisco. "In our shop here, the tax rate has gone from 15 percent all the way up to almost 35 percent for adult consumers. That is a huge hit. And it's going to mean that a significant number of people, less affluent consumers, are going to turn to the lower prices of the underground market."

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93 responses to “California Is Taxing the Hell Out of Pot, but Washington Is Even Greedier

  1. How wil prices compare to the illegal market? That’s key to making the business viable for retailers. With their established distribution system, the black market may react to crush the budistas.

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  2. I admit to two personal failings here. One, I can never tell if something is overpriced. It always just seems to me that the price is the price, it’s either something I want to afford or not. I hate the act of shopping and refuse to invest more time in it than absolutely necessary. Second, I don’t buy marijuana so I have no idea if these prices per unit of measurement that Sullum is tossing at me are outrageous. But I’ll accept as a general point that high taxes on vices solely because they’re vices are worth my outrage.

    1. Not sure it’s worth your full outrage. Maybe a 2 on a 1-10 outrage meter. You could write stories about high sin taxes for the next hundred years. They’re nowhere near as consequential as banning the product.

    2. So you’re telling me that if the gas station you normally go to had gas at $2.50 yesterday, and $3.50 today, you wouldn’t check another one to see what their price was?

      If you were buying a new Ford Fusion, and the dealer quoted you $30K, you wouldn’t call another dealer to see what his price was?

      You must be a trust fund kid.

      1. The ten dollars I might save by looking for cheaper gas literally isn’t worth the extra fifteen or twenty minutes it would add too my commute, especially since gas prices tend to rise across gas stations in roughly proportionate rates (that is, the cheapest gas station on my commute is usually the same one, regardless whether today’s price is $2.50 or $3.50).

        So sure, I’ll take a look at other prices as I continue on my way, but that will impact *future* decisions, not *current* ones.

        A car is entirely different. It’s a one-time five-figure expense that impacts me for the next seven to ten years. The cost-benefit analysis of shopping around for that is much more favorable then shopping around for a luxury good that doesn’t break three figures.

      2. So you’re telling me that if the gas station you normally go to had gas at $2.50 yesterday, and $3.50 today, you wouldn’t check another one to see what their price was?

        That is absolutely the case. I pull into the most convenient station. And, no trust fund. I hate shopping. Hate it with a passion. It is worth to me paying more or not buying something at all for me to not have to price shop.

    3. Prices work on the margin. Prices are neither “too high” or “too low”. If one squints one can guess at a clearing price, but that’s a different thing. If a price is higher than the market would normally provide, it just means that people buy less of it at the margin. You were going in to buy a phat blunt, but taxes made it so you bought just a couple of doobies instead. You just stretch your pot dollars a bit 13.7% further.

      p.s. It also depends on elasticity. Something you’re addicted to, like nicotine, has high elasticity, so you still end up smoking that pack a day regardless of the taxes.

      1. It’s been a number of years since I’ve taken an Econ course, if something is highly elastic doesn’t demand go down with an in price? If I am wrong I plead senior moment.

        1. The law of supply and demand is simple: When demand is down and supply is up, prices go up. When demand is up and supply is down, prices go up. That’s all you really need to know

    4. Many people think that their free time is worth nothing. Those that ignore opportunity costs are probably correct.

  3. Sullum – not to tell you what to do or anything, but I would be interested in a state-by-state overview of MJ home cultivation laws.

    1. The Marijuana Policy Project has a fairly extensive and frequently updated State by state listing online. They include currently proposed legislation and previous attempts at relaxing of laws

      You might want to go there via incognito browsing.

  4. Sadie Gurman
    Associated Press
    Just out now:

    Attorney General Jeff Sessions is rescinding the Obama-era policy that had paved the way for legalized marijuana to flourish in states across the country, two people with knowledge of the decision told The Associated Press. Sessions will instead let federal prosecutors where pot is legal decide how aggressively to enforce federal marijuana law, the people said.

    The people familiar with the plan spoke on condition of anonymity because they were not authorized to discuss it before an announcement expected Thursday.

    1. What a pussy. Is he trying to preemptively wash his hands of the resulting shit-storm? Sessions, the prosecutors work for you. You tell them what to do.

      Didn’t Trump say he is on charge of the DOJ? Well, here’s his chance to show it. He has to know that this is a losing position.

      1. Didn’t Trump say he is on charge of the DOJ? Well, here’s his chance to show it. He has to know that this is a losing position.

        What would ever give you that idea? Have you taken a gander at the popularity of Trump’s other ideas and policies? Even if he were told the policy is unpopular, why would he believe it? He says everything else in the media that contests his ideas or initiatives is fake news; if polls show he’s an unpopular president, they’re just making it up, right?

  5. That’s right. Tax the hell out of the killer weed. So the black market will drop prices a little and continue to operate and make money. The politicians won’t care because they’re getting their “tribute” from every legal operation in the state.

    1. Yup. It’s free cash for the trough. Just like cigarettes – they don’t care about the black market as long as they can find the sweet spot that maximizes the tribute to them.

      1. The Giggles Curve.

    2. I’m seeing prices at half or less under legalization in Washington. I understand the logic, but there was the huge cost of dodging authorities baked (heh) into the previous black market prices, and that hasn’t gone away and in fact is only bigger now because A) there are less illegal growers, and B) the legal ones have a very strong incentive to push law enforcement to catch the few illegal ones.

      As I said below, I’d be shocked if there even was a black market any longer in Washington. I know tons of weed smokers, and *none* of then goes to a black market rather than just popping into the legal stores and paying half price for much better pot and tons more choices and convenience.

  6. Really feels like it’s more pro-drug war types still working behind the scenes to say, “Look! We legalized it, and the violent drug dealers still exist!”

  7. “I was going to pay the tax, but then I got high.”

  8. What does California not tax the hell.out of?

    1. And it’s practically a third-world country as a result huh?

      1. It’s why people stay home in Oklahoma.

        1. Hmmm… Yuba City or Ponca City… of course there is always beautiful El Centro

      2. It seems to be doing an excellent job of driving out the middle class from the high cost of living. So, yeah.

        1. You people are too ridiculous for words. More poors in our neighborhoods, that’s what’s wanted in capitalist libertopia all of a sudden!

          1. It’s easy to win the war on poverty when you deport them.

          2. I am not sure in what reality you live in where the middle class are “poors”. The Left is not exactly shy about its interest in importing a dependent underclass.

            1. So what types of government intervention into the supply-and-demand that leads to high property values do you favor?

              1. I forgot: California isn’t high tax Socialtopia. It’s supply-and-demand free market awesomeness.

                Gee: this is getting hard to keep up with.

                1. Trudat. When buying motorcycle or car parts in CA, they always said that if you don’t need a receipt you don’t have to pay the tax. Of course, I always opted to pay more.

                  1. SoCal is THE place to redo your panhead. So, there’s that. You can just go to the store instead of mail-order (those pricks never mailed me my spun aluminum clutch cover) or buy online (nonexistent then). Okay, it was a while ago. Leaded gas, my favorite, was still available. Finally, a shout-out to Earl’s Supply (the staff there can solve any problem) and Lemon Grove Cycle. I won’t name anyone who didn’t give me a receipt.

                    1. Aeroquip’s HQ is definitely worth a visit.

      3. Get out of the affluent enclaves of the SF and LA, where all the jobs are, and it really does start to resemble a third world country. There might be a few pockets of jobs here and there, but it’s really a shithole in spots. Fuck, you get to a place like Kings County, and the dominant employer is the county government itself.

        It’s not all Sacramento’s fault, but they’re definitely contributing to the problem.

        1. What’s your problem with Kings County, boy?

        2. They have LeMoore and Hanford which are nice size and hardly shitholes. Kings County is more desirable than any place in the lower 49

      4. And it’s practically a third-world country as a result huh?

        Yes, it practically is, with one of the highest income inequalities, one of the highest poverty rates, massive populations of uneducated workers, and absolutely shitty living conditions except for a few wealthy enclaves. On top of that, it has one party rule and massive taxes, like any good banana republic.

    2. Property.

  9. and like cigarettes if you tax it to much you leave the black market in place but thats okay since it gives the law a reason to continue the war on drugs, tax evasion etc…..

  10. Taxes? In California?

    Shut your ducking mouth!

    1. I can’t believe that they didn’t tax the incredibly productive citrus trees in the yard. We couldn’t even use all the fruit and even had problems giving it away. Thirty years later I still resent paying for lemons and grapefruit.

  11. Not a surprise. Not. At. All.

    Back when the progressives were trying to get medical marijuana decriminalized, the rallying cry was, in essence, “Legalize so we can tax the shit out of it!” The arguments from the crunchy counties surround San Fransisco were inevitably about raising revenues. It was never about rights, civil or otherwise. It was about the revenue.

    White affluent progressives don’t care about the legalization. Being white and affluent, the prohibition does not affect them. So they didn’t much care about legalizing it except for the possibility of more revenue to fund their spendthrift ways. When one would suggest to them to legalize it and then tax at only the same rate as alcohol, they would just look at you like you were an exotic species of insect.

    Fuck them. They’re fake cosmo libertarianism is even more disgusting the fake paleo libertarianism on the right.

    1. It was certainly fun to watch the legalization argument in my area shift fruition a civil liberties one to an argument about filling state coffers.

  12. These tax rates all seem rather beside the point when you get to the end and it’s revealed that black market weed costs half as much or less pre–tax

    1. Yup. It’s why cigarette smuggling exists despite cigarettes being legal.

    2. Well the thing with the store fronts is you don’t have to worry about your bags being light or the budtender bugging you to pack a bowl from the 3.0 gram “eighth” you just bought. Plus dispensaries have options….most street dealers have whatever you like as long what you like is what they have.

  13. btw, how much is an 8th, anyway? I mean, how many doses can one get out of that much?

    1. Yeah, Average actual prices, with our without tax, compared to illegal pot process in the same area, would have been useful.

    2. “doses”

      doesn’t really work that way. How many “Doses” in a 6 pack of beer?

      an 8th is probably analogous to 1 1/2 cases of beer. If you smoked it all by yourself in one sitting, it would be a huge waste of beer. But you theoretically could.

      A small group of friends could easily knock off an 8th in an evening. tho it depends on the potency and how-high people actually like to get. if its very good, tiny amounts can be pleasant w/o requiring any more.

      1. “knock off an 8th in 15 minutes”
        FTFY

        1. I could do that in one or two evenings if I didn’t drink and abstain from pharmaceuticals. Plus, it would be easier to go to the gym in the morning. After a few tokes and a big cup of coffee.

    3. 3.5 grams.

  14. Fortunately, it’s a weed that’s easily grown, so there’s no reason to pay taxes.

    1. It’s not that easy to grow if you want actually good stuff. Hemp is easy to grow and grows as a weed. High quality pot, not so much.

      1. It’s not hard if you have good genetics. You might have low yield but it will do the job.

      2. It’s not hard if you have good genetics. You might have low yield but it will do the job.

    2. +1 non-moron

  15. “” it’s going to mean that a significant number of people, less affluent consumers, are going to turn to the lower prices of the underground market.”

    “Well then, clearly we need to spend more on law enforcement then”
    /prog solutions

  16. I can see my hippie friends from the 60’s talking about the good old days when pot was 15 to 20 dollars an ounce.

    1. From some quick online calculators I found, $20 in 1960 has roughly the same buying power as $160 today. So it looks like the black market process have (accounting for inflation) been relatively flat.

      1. An ounce in a prohibition state is more like $350.

        1. So which is it? Here you say pot is *more* expensive in prohibition states. Below you say it’s cheaper.

          Either way, my statement was based on Ride ’em’s and Sullum’s numbers.

    2. We had gold standard dollars before Tricky Dick the Quaker prick.

      1. Nixon….the unsung hero of progs

    3. The weed today would render the hippies from the 60s permanently stupid compared to the lawn clippings they smoked back then…and they didn’t buy it in ounces, they bought it in “lids”

      1. Most places I bought weed then a “lid” was an ounce. Midwest, west and New Jersey.

    4. ’72, ’73 Mexican dirt weed was 120 bucks for a pound in the Midwest. 12-15 an oz. Jamaican “creeper dope” 20/oz on the east coast. Hash about 5 bucks a gram. We used to buy a pound, sell 12 ozs/$10 and get a free quarter lb for indulging, lol. It was not nearly as strong as Humboldt grown or lab weed they grow legally now days.

    5. THC/dollar/weight/health effects/constitutional rights/reality (minus Session’s conniption fit/anal retenttive/ post impact Keebler affects) opinions affect public sentiment. Just DIAF already.

  17. That’s some pretty small potatoes compared to the blackmail, ransom, bribery, graft, boodling, asset forfeiture, libel and confiscations had under the auspices of shoot-first prohibitionism. But the parasitism is in keeping with the 21st Amendment, and will keep the market for Hawaiian woodrose, chacruna and shrooms as lively as ever. Folks will need reasons for voting Libertarian, and the continued existence of fascist prohibitionism is as good a reason as any.

  18. It’s nuts you can get the same quality at a lower price in a prohibition state.

    1. Nuts but entirely predictable.

      1. If by “predictable” you mean “not true”, then, yeah.

        See my post below, but prices in Washington now are about half of what they were pre-legalization, perhaps even lower, plus much more selection and convenience.

  19. It puts them in a hard place. Try not to add taxes that make the legal price higher than the illegal price. But over time as legal weed overtakes illegal weed, the taxes of course will of course go up. But here’s the thing. Why not tax it according to its THC content and not the weight of the package. That would put it in line with how liquor is taxed.

    1. For the more “refined” products that could work, but I thought that want reliable for the “raw” stuff?

  20. In California we have a total effective tax rate of 37%? We now understand why moonshine remains a relevant trade in Appalachia even though Prohibition ended in 1933.

    On the other hand it may have a beneficial effect in reducing the incidence of toking and driving, since our overall effective gas tax is 76.7 cents per gallon. How can a poor man live in times like these?

    1. Shoot everyone that you don’t like.

  21. As a yute growing up in California in the 60s, pot was typically $10 an ounce. When I lived around San Diego in
    the early 70s, sometimes $7 an ounce. Speaking for a friend.

  22. “California Is Taxing the Hell Out of Pot, but Washington Is Even Greedier.”

    You’ve got it backwards. It’s not greedy to tax the shit out of people, it’s greedy for people to keep more of their own income. Duh.

  23. I live in and buy weed in Washington.

    Sure, there is a lot of tax. The thing is, there already *was* a lot of tax before legalization: the “tax” associated with dodging law enforcement, risking jail, etc. I’m against *both* of these “taxes” of course, but articles like Sullum’s really downplay the effect that enforcement had on the cannabis industry prior to legalization.

    In practice, despite the high tax rates, I pay about half now of what I used to pay, and I get much better weed to boot, plus a *TON* more options. My local store probably has, oh, 200 strains of flower, plus more edibles, drinkables, oils, etc., etc than I could possibly understand what they do. The convenience of just being able to stop in a store rather than have to call some questionable person and arrange to meet them in the WalMart parking lot etc cannot be overstated. Etc.

    There really isn’t any doubt in my mind: as a consumer, my cannabis situation is much, much better under a legal but highly taxed system than it was under an illegal system.

    1. I should add that i would be *shocked* if the black market in weed really even exists any longer in Washington, perhaps excepting some “collective/combine” type situations out in the sticks. In the more populous areas, there are *tons* of shops, and the price/selection/convenience advantages are overwhelming compared to the black market. I don’t even remember who I used to buy weed from.

  24. Can you translate those to joints per dollar, as many of use have never smoked pot in our lives and have no idea how much $50 worth of pot is in terms of legal vs illegal street value.

  25. Well you guys wanted legal weed, there you have it now. Government says: You don’t like the price, f you pay me.

  26. As a longtime Washington state resident, I agree with Outside the Box.
    It’s just so much nicer to be able to browse retail offerings on the web (most stores have websites) and then go to the store and buy what you want. No muss, no fuss.
    And the prices aren’t that bad. At the low end, you’re paying around $100 an ounce; at the high end, closer to $250 or even $300. But you can always get an eighth of pretty high quality weed for under $40. And you have literally dozens of choices of strains. Try getting high-CBD weed from your dealer; here it’s actually undergone lab tests.
    If you consider yourself a libertarian, you ought to support capitalism, and that’s what we have here. It’s taxed, yes, but so is just about everything else (including soda in Seattle if you’ve been paying attention).
    Here you go: one of our local retail shops: http://greensiderec.com.
    To me, free market + taxed is leaps and bounds above fining people and throwing them in jail. Don’t let the perfect be the enemy of the good.

  27. The greedy bastards in government are going to strangle the golden goose before it lays it’s first egg.

    DO NOT BUY POT FROM GOVERNMENT SANCTIONED OUTLETS, THEY ARE A RIP-OFF. SUPPORT YOUR INDEPENDENT UNDERGROUND GROWERS. THEY NEED THE BIZ FOR FOOD AND RENT NOT FOREIGN AID AND GRANTS TO GLOBAL WARMING LIARS.

  28. well….I assume with the nice high supply of weed now in some of those high tax states they are just artificially keeping the illegal weed dealers in solid profit status.

    Seems like typical government mentality.

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