On New Year’s Day 2018, California became the sixth state to end prohibition by legalizing the sale of recreational cannabis. In addition to striking a blow against the disastrous War on Drugs, the full-fledged legalization of marijuana was also expected to trigger an economic boom throughout the Golden State, as it did in other states like Colorado.
Now that the first year of legal cannabis sales has come to a close, however, it appears that reality has fallen short of the initial projections. And thanks to California’s proclivity for excessive regulation and taxation, the “green rush” that the state hoped for has yet to come to fruition.
The Green Rush That Never Was
Over the last several years, marijuana legalization has proven to be an idea whose time has come. As it stands today, ten states and the District of Columbia allow for recreational use of the plant and an additional 23 states allow for medicinal use. National polling also shows that 62 percent of the country now favors some form of legalization.
Most people now realize that the War on Drugs has been a complete disaster as well as a huge waste of resources, which has softened many hearts when it comes to the issue of legalization. But there are also economic incentives that have made ending prohibition exceedingly popular across the country. By legalizing cannabis, you open up the door for an entirely new industry with the potential to bring in billions of dollars in revenue each year and create a countless number of new jobs. This is appealing even to those who are personally opposed to recreational use of the plant.
California had high hopes that this would be the case with its own economy. On the eve of legalization, several state officials predicted that recreational cannabis would result in the creation of 6,000 new dispensaries across California. This certainly would have made a substantial impact on the economy, but unfortunately, the actual number of new stores fell far below the prior year’s generous predictions.
According to the California Bureau of Cannabis Control, only 547 temporary and annual licenses were issued to new retail stores in 2018. As a result, the green rush that was expected to grow the economy never came. In 2018, cannabis sales only amounted to $2.5 billion, which on its own might not seem too shabby but is, in fact, half a billion less than the total number of sales for 2017, when only medical cannabis was legal.
So why has California failed to replicate the booming green economies of other states? Unfortunately, the answer to this question is the root of the majority of the state’s problems: too much regulation and taxation.
Taxed and Regulated to Death
Setting up shop in California’s heavily regulated economy is hard enough for regular businesses, but when a substance like cannabis is involved, the process becomes all the more complicated.
For starters, business owners have to seek approval not only from the state but from local municipalities as well. Unfortunately, many cities have instituted their own bans on recreational cannabis. Of California’s 482 different cities, only 89 actually allow recreational dispensaries. Other states have faced this problem, but many dispensaries have taken advantage of a loophole in the system.
By offering product delivery, many dispensaries have been able to expand their services to cities where the dispensaries themselves have been banned, but the use of the plant is still legal. California currently has a ban on marijuana delivery services, which has made it more difficult for “potrepreneurs” to meet the demands of those living in cities where dispensaries are still illegal. However, the Bureau of Cannabis Control is looking at a proposal that would put delivery of the plant back on the table, which would help boost sales across the state.
Even those living in one of the 89 cities where retail is permitted are still subjected to layers of regulation that make it difficult to get a business up and running. Having to seek licenses from both the state and the city is difficult enough on its own, not to mention expensive. But prospective dispensary owners must also comply with rules and regulations handed down not only from the text of the Medicinal and Adult-Use Cannabis Regulation and Safety Act but also from the Bureau of Cannabis Control and any local governments as well. This makes the whole process extremely tricky to navigate.