For years, supporters of marijuana legalization have argued that local governments stood the most to gain as it would allow them to regulate cannabis business — and then tax them.
But now that both the medicinal use and the recreational use of cannabis have been legalized in California and the moment has arrived for locals to approve a tax on cannabis operations in unincorporated areas of Sonoma County, some appear to be getting cold feet. A number of growers, including the 260-member Sonoma County Growers Alliance, are opposing Measure A. Why? Because they claim the cannabis regulations adopted last year by the Board of Supervisors are too cumbersome to ensure growers will come out of the shadows, the taxes are too high and the details of the ordinance and tax measure were approved too quickly, without proper feedback from those most impacted.
Some of that may be true, particularly the concerns about the risks of overregulation fueling a robust black market. But we believe the county, on balance, is still far better off with this ordinance than without it, and we encourage voters to approve Measure A in the March 7 special election. Here’s why.
Second, while it’s true that the taxes under Measure A could be as high as 10 percent on gross receipts, it is not going to start out that way. That is the ceiling, not the starting point. Supervisors have indicated that they will begin with a 5 percent tax on manufacturers and no tax on distributors, labs and other businesses. Small operators would be taxed on a per-square-foot basis. Outdoor cultivators, for example, will have a maximum rate of $10 per square feet, although at the outset the tax will range from 50 cents to $5 per square foot depending on the size of the operation. Indoor cultivators face a maximum rate of $38 a square foot but will start off paying $1.88 to $18.75 at the beginning. The intent in starting off slow is to give businesses incentive to come out of the shadows and get up to speed as legitimate operations. That makes sense.
Third, this tax framework is in line with what is happening in many other areas around the state. Monterey, Santa Cruz and Mendocino counties as well as the cities of Cloverdale, Vallejo and Santa Cruz all have approved tax measures with a maximum of 10 percent of gross receipts. Both San Diego and Solano counties have a maximum rate of 15 percent.
But here’s the most important reason that voters should approve Measure A — because the costs for regulating this industry have been and will continue to be considerable. Yes, the funds, if approved by a simple majority vote on March 7, will go toward code enforcement and regulation of these new rules. But there are significant other costs related to the industry including cleanup from the extensive environmental damage caused by illegal grows to policing the bad actors who get involved in what remains, in the eyes of the federal government, an illegal, all-cash business. The county is projecting that the taxes would bring in about $6.3 million a year. That’s a good start.
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