One San Francisco politician’s attempt to save the struggling California cannabis industry has caught the eye of the Wall Street Journal editorial board, who seem eager to teach the San Francisco progressive a lesson in conservative economics.
A Tuesday editorial in the East Coast newspaper took aim at a new bill from San Francisco Assemblymember Matt Haney that would stop California’s tax rate for legal cannabis from increasing. Currently, the state excise tax rate on legal pot is set to jump from 15% to 19% on July 1, an increase that Haney and others say will decimate the legal pot industry.
“If we continue to pile on more taxes and fees onto our struggling small cannabis businesses, California’s cannabis culture is under serious threat of extinction,” Haney said in a Monday news release.
It didn’t take long for the Wall Street Journal to point out the progressive politician’s anti-tax stance. “We kid you not,” the editorial board bemoaned, adding that apparently it only takes raising taxes on Democrats’ “favorite recreational drug” for some state officials to call for tax relief. The editorial writers cite a conservative economic principle called the “Laffer curve,” which theorizes that overall tax revenue will actually fall if a government increases tax rates too high because consumers and producers will change their behavior in response to the high taxes.
While the Laffer curve is only a theoretical concept and comes with its own controversy, it is illustrative of a problem that the cannabis industry has long argued is hurting the legal market in California. A recent study commissioned by the state found that cannabis users in California are buying the majority of their marijuana from the tax-free illicit market, where unregulated cannabis is cheaper than the taxed products at legal stores. The legal cannabis industry and Haney argue that any tax increase will only send more customers into the illicit market, thus furthering the politician’s “threat of extinction” worry.
That said, California’s legal weed market is unique, in large part because of the state’s robust illicit market — a rarity in other industries. Of course, the Journal still ends its editorial gloating that “it will be fun to watch” Haney’s bill move through the Legislature as “he seeks to explain why marijuana deserves a tax break but no one else does.”
