The State of California is nowhere near achieving its revenue targets for State taxes on Marijuana. With $84m raised last year out of a targeted $185m, Cannabis Report forecasts California will not even achieve half its target for the current financial year. This at a time when the State tax take has far exceeded targets in all other areas.
The problem is that the taxes were set too high. This has proved a costly and damaging mistake by legislators – who are currently scrambling to reverse their previous polcy. But until they do, the high level of taxes is currently having the effect of underpinning prices in the illegal market which have gone up slightly as a result.
It is quite likely that illegal sales have hardly fallen since legalisation and that legal sales have simply added to the total sales volume.
Now Californian State legislators are attempting to reverse their over-high tax levels, but the sticking plaster reform they are planning would only cut taxes by 4% – not enough to make any difference.
June Budget Assumptions. The June 2018 budget package assumed that 2017-18 Cannabis revenue would be $185 million and that 2018-19 revenue would be $630 million.
Updated 2017-18 Estimate: $84 Million.
The administration currently estimates that retail excise tax revenue was $77 million and cultivation tax revenue was $7 million in 2017-18, for a total of $84 million ($101 million below the projection in June).
First Quarter of 2018-19 Revenue $64 Million.
For the first quarter of 2018-19 (July through September), retail excise tax revenue was $52 million and cultivation tax revenue was $12 million, for a total of $64 million. This was substantially more than was collected in any quarter of 2017-18.
2018-19 Revenue Scenarios.
So far, cannabis tax revenue has grown at an average quarterly rate of 33 percent. How long this rapid growth will continue is unclear. If revenue continued to grow at this rate through the end of the fiscal year, the 2018-19 total would be roughly $410 million. In a more modest growth scenario—five percent per quarter—2018-19 revenue would be $280 million.