Don’t drown marijuana in regulations

By The Editorial Board

California voters approved the legalization of recreational marijuana use in November, and now regulators are hard at work devising the new rules and fees to be imposed.

There seems to be some considerable doubt, however, as to whether the regulations will be ready to go by next year, when the new licensing system and other regulations for the sale of marijuana are supposed to go into effect.

“Being blunt, there is no way the state of California can meet all of the deadlines before we go live on January 1, 2018,” state Sen. Mike McGuire, D-Healdsburg, who represents several Northern California counties in prime marijuana-growing country, told the Sacramento Bee. “We are building the regulatory system for a multibillion-dollar industry from scratch.”


There is good reason for skepticism. After all, though voters passed Proposition 215 to legalize medical marijuana back in 1996, the Legislature did not get around to setting up the first comprehensive state licensing system until 2015.

And the state has a long list of regulatory schemes to implement. In addition to the licensing system, it will be developing regulations covering everything from taxation to growing to testing to advertising to packaging to distribution to delivery to tracking products from production to sale, and probably much more.


The state has been developing regulations since 2015, though, and it can draw upon the examples of several other states that have legalized recreational marijuana. It should also learn from their mistakes, and one of the biggest mistakes has been to tax and regulate marijuana too much.

In a recent column for Reason.com, J.D. Tuccille explains how the black market for recreational marijuana in Colorado has continued to thrive despite legalization due to excessive state and local taxes and expensive regulatory requirements. This has pushed the legal market price for marijuana about 33 percent higher than the black market price in Denver, according to a PBS report. In short, Tuccille maintains, “taxes [are] so high and regulations so burdensome that they make legal pot uncompetitive.”


This destroys one of the main benefits of legalization: eliminating the crime, quality control and other problems due to the black market.

The danger is that California seems to be ignoring basic economics and heading down the same path. Under Proposition 64, California will impose a 15 percent retail excise tax on both medical and recreational marijuana products. There are also growing taxes on each ounce of dried marijuana flowers and leaves. On top of these, state and local sales taxes, which average about 8 percent, are charged on nonmedical products, and both medical and recreational products may be subject to additional local taxes.


And that does not even account for the regulatory fees, which Prop. 64 requires licensing agencies to charge in order to cover their regulatory costs.

It is a very welcome development that we will no longer be locking up people at taxpayers’ expense and destroying families and career prospects for the victimless crime of putting a substance such as marijuana into one’s own body, but many public safety and economic issues will remain if the state cannot resist the urge to impose so many burdensome taxes and regulations that it chokes off the legal market and perpetuates the black market.