How Price Influences Pot’s Customers

As voter-backed Prop 64 passed, recreational marijuana becomes legalized in the state of California. This was significant because while recreational marijuana has been legalized in states like Washington and Colorado, California would be the largest state, in terms of just about every measurable metric like population, economy or size, to legalize cannabis for uses outside of the medical norm. If California was its own country, its economy would be the sixth largest in the world. California’s experiment with weed unlike Colorado’s would show that regular consumption of the sticky tobaccy could work on the large scale. The main factor that pushed a lot of voters and politicians to support cannabis legalization was the possible tax revenue for state and local municipalities.

Many people figured that cannabis was going to be consumed, bought and sold regardless so the state may as well be able to tax it and fund schools, law enforcement, social programs and infrastructure projects with it through a reefer tax, but a problem has taken root. The problem that has taken root in California is one that hasn’t been seen as strong in Washington or Colorado; the resurgence of the black market. California plans to levy a fifteen percent statewide tax and local municipalities like Oakland, are levying a ten percent tax. This means that cannabis from your local prop 64 friendly dispensary will have a twenty-five percent markup on it. High taxes remain in place even though Los Angeles dispensaries have made the city two million dollars in less than two months. The high prices that artificially raise the cost of legal reefer may turn many consumers back to the black market where taxes and price increases from regulatory hurdles are nonexistent. Of course, the sad effect of this is that state and local municipalities miss out on millions, maybe even billions of dollars in possible tax revenue.

The state and local municipalities want people to buy legal marijuana and so do the consumers. Cannabis consumers want to know that what they are getting is of a high quality and not laced or treated with any possibly harmful chemicals, but consumers also won’t pay exorbitantly high markups just for the legal sticker. Research from Colorado and Washington suggest that cannabis prices fall after the first year of sales when businesses no longer have to write off high initial setup and regulatory costs. This could naturally correct California’s market, but no one knows for sure if the findings from either state will transfer over to California, whose regulatory bodies are notoriously more complex.