Growing Weed Taxes & Rising Medical Prices In America

cannabis plant in a big grow op

Primo weed has been grown for decades deep in the Emerald Triangle, but all of that seems to be changing after full legalization. After taking effect two years ago stigma around weed has dissipated. But that reaps its own challenges that we are now seeing. The costs for farmers to convert from the previous lightly regulated medical marijuana program into an officially legal market have been much higher than anticipated and haven’t brought in the tax revenue predicted. As a state, in 2018, California collected only 30 percent of its projected tax revenue, a drop from $1 billion to $345 million as reported by the Orange County Register. As a result, the political and economic landscape appears counterintuitive when evaluating the circumstances faced by many growers.

How Weed Taxes have affected Growers

You’d think full legalization would widen the customer base and collect more taxes but this doesn’t account for massive the drop in small-business farmers who can’t keep up with the regulations. After the Compassionate Care Act was passed in 1996, many previously illegal growers moved from the black market to medical collectives with state licenses. There were regulations in the twenty-year period between Compassionate Care and Prop 64—which legalized the plant recreationally—but now they seem minuscule compared to the hefty bureaucracy in place now. In the time after Prop 64 people have started to refer to cannabis as “the most regulated crop in the nation’s most regulated state.” Plants are tracked at every stage of their growing process and must meet separate demanding state and county regulations.

weed leaf made of money

Before 2016, farmers paid income and sales taxes depending on where they grew, but now pay taxes before and after the grow, as well as after the crop is sold. Zoning certificates and water board fees run anywhere from $3,000 to $5,000. Old farms that used to love the seclusion of Humboldt’s dirt roads are now suffering by having to pay for those roads to be paved, which sometimes costs over $100,000. Before they can even pay to have this work done, many are told by the California Department of Agriculture they need to wait two years for an environmental impact study. This two-year period can cause farmers to lose their license to grow because they have to build immediately in order to keep it. It’s like a bureaucratic venus fly trap where second and third generation marijuana growers are struggling to keep up with industry they built the last fifty years. Every time they struggle to become compliant, they slip further into a pit of taxes and fees.

Corporate Monopoly & The Offshoring Effect

This isn’t to say that taxes and regulation are an inherently bad thing, but there has been very little foresight in how deeply the laws would affect small growers. The only people who can keep up are large-scale grows, which threatens to undermine the culture and quality of California cannabis. As Politico reports, this is having tangible effects on farmers trying to establish a reputable business. Thomas Mulder, a grower in the Humboldt area, had to dip into his retirement savings to keep up with the costs and taxes from last year. It drained his savings from $80,000 to about $500. Based on the amount of cannabis his farm grows, he should earn about $1.5 million. After all the expenses though, Mulder believes he’ll net $100,000. It’s as if a foreign country is bankrupting the medical cannabis community, but it’s coming from within our own borders. This is a layup for corporations to get their foot in the door, and those with enough money are taking shots.

Money emoji on green weed leaf

There have been efforts to mitigate these costs to farmers, like Humboldt County charging its farmers canopy taxes after the harvest instead of before. But there needs to be widespread help if the local growers in the Emerald Triangle are going to survive and continue their legacy of growing high-quality weed. Since cannabis farmers aren’t able to get loans from banks to cover these expenses—because marijuana is still a Schedule I drug federally and banks are regulated on the federal level— there needs to be reform in this area too. Democrat Representative Jared Huffman of Northern California says, “Criminalizing banking for businesses that are legal under state law is completely absurd.” Right now the SAFE Banking Act is making its way through Congress to address this issue. If it doesn’t pass, there’s no proposed solution for making sure historically prosperous small farms like Mulder’s aren’t a remnant of the past. This also affects medical patients who now have to pay more for the same product they’ve had for years.

Medical marijuana prices in California dispensaries rising

In June, The Associated Press released a report showing the complexity of the emerging world of marijuana policy. While recreational weed is the obvious legal path, the medical programs that sustained patients for decades shouldn’t be cast by the wayside. But hat’s what’s happening due to a lack of institutional support. Once states like Colorado, Alaska, Nevada and Oregon adopted recreational pot, their medical programs saw significant reductions in membership in the following years. Oregon’s memberships dropped by about 65%.

Green weed leaf and green bones of hand x-rayMost of this drop is from users who abandoned the medical program once recreational weed became available and all you needed was an I.D. Recreational cannabis has often affected the medical industry in supply and price. Some in California even claim that the price of their marijuana rose from $35 an eighth to nearly $100. David Mangone, government affairs director for Americans for Safe Access, says “Some of the products that these patients have relied on for consistency, and have used over and over for years, are disappearing off the shelves to market products that have a wider appeal.” This combined with the rising costs makes it difficult for the remaining medical patients, many of whom are low-income or have a fixed Social Security disability that won’t adjust for the new cost of their medicine.

Oregon medical cannabis dispensaries

In Oregon, the number of medical-only dispensaries plummeted from four hundred to now just two, which leaves around 28,000 medical patients unsure where they will get the reliable and affordable marijuana they’re used to. Typically once general legalization happens in states, the new regulator boards put low caps on edible potency, usually coming from the position of protecting children from accidentally ingesting a candy or cookie. But, intentionally or not, this makes medical customers have to buy more product for the same dose they use to alleviate their condition.marijuana magazine cover with weed leaf I can attest to this, having seen packages of three 125mg gummies sell for $15 in Oregon during the waning days of medical-only. Now that edibles can’t have more than 100mg in a package, you’re lucky to get 100mg of quality edibles for $15 and it often breaks into the $25-$30 range. The numbers compiled by the AP show that up north in Alaska medical cardholders dropped by 63% after recreational sales began in 2016, Nevada fell by almost 40% since 2017 and Colorado lost 19% since 2014. Neither Oregon or California doesn’t keep data on medical patients but users say they’ve experienced similar negative effects of rising prices and dwindling product.

Legalization Blueprint For Future States

This isn’t an easy issue to solve now that some places like Washington and California have essentially combined the two markets (medical and recreational) into a big recreational one. But this is something that future legalizing states can learn from. There are already 33 states with medical programs in the United States and more will follow. Soon those states will adopt sweeping legalization and they can learn from the mistakes of not protecting the medical market. “Patients have needs. Consumers have wants,” said Anthony Taylor, a medical marijuana advocate member of the Oregon Cannabis Commission. “Patients are in crisis right now.”