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County cannabis growers get a tax break—but worry it’s not enough.

Cannabis cultivation

The revised tax structure on cannabis cultivation, approved on Feb. 14, cuts the rate on mixed light cultivators to $1.46 per square foot per fiscal year, from $3 per square foot previously.

Rey Mashayekhi here, thinking about cannabis—well, not so much that intoxicating, if somewhat lethargy-inducing plant itself, but rather the struggling multibillion-dollar industry around it.

Don’t let the influx of states legalizing marijuana every election cycle fool you: The industry is going through hard times right now, both across California and the nation at large. Industry participants blame overproduction for tanking crop values, while the ongoing federal prohibition means the sector remains largely unbanked and hindered by all sorts of bureaucratic red tape. One only has to see how publicly-traded cannabis stocks have fared as of late to get the picture.

While Monterey County’s cannabis sector faces many of those same challenges, they come with a unique twist specific to our status as a major agricultural economy and the way we’ve chosen to regulate the industry. Since becoming legalized here in 2016, cannabis has become the third-most valuable agricultural product in Monterey County (total production value eclipsed $618 million in 2021)—and yet growers are getting wiped out, with 15 cannabis businesses in the county closing shop last year alone, taking the tally to 35 shuttered operators since 2019.

Growers, who represent the bulk of the county’s cannabis businesses, have pleaded with regulators recently to lighten the regulatory burden during these difficult times. They’ve taken issue with county business taxes imposed on growers on a per-square-foot basis, which leave those growers with a tax bill whether or not they manage to make any money off their crop. That, coupled with the same economic headwinds facing all ag growers in the county—such as higher energy and fertilizer costs—have forced many to scale back dramatically, if not go under entirely.

A new tax-cutting measure promises to bring some relief, though it’s unclear whether it will be enough. After delaying its initially planned vote last month, the Board of Supervisors voted Tuesday, Feb. 14, to pass a revised tax structure that cuts the rate on mixed light cultivators (who comprise the large majority of the county’s growers) to $1.46 per square foot per fiscal year, from $3 per square foot previously, retroactive to Jan. 1, 2023. The move follows a similar tax cut approved by the board last March, which cut that rate from $5 per square foot, as well as a tax freeze last year that deferred (but did not forgive) outstanding taxes on those operators. 

But many cannabis industry sources say those moves are still not enough. They’ve called for even more dramatic tax measures akin to those in other jurisdictions like Humboldt County. They’ve also urged the county to reform its regulatory program to be less burdensome on everything from building code enforcement on their greenhouses to health code mandates prohibiting portable toilets at their facilities. 

Otherwise, they claim, there soon won’t be much of a Monterey County cannabis sector to regulate. That would be a loss to the county, which has reaped more than $70 million in tax revenue from the industry since launching its legal cannabis program. Already, the toll is becoming evident; sources say the Monterey County Cannabis Industry Association, the main industry advocacy group in the county, is essentially defunct for the time being—with its membership reeling amid the industry’s ongoing contraction.

(1) comment

John Thomas

Right. Science and widespread experience have shown cannabis has no significant harms. The only regulation it really needs is to prohibit sales to children and require adequate sanitation, as we do for all produce.

The extra taxes on alcohol and tobacco are justified because their massive harms create huge social costs. The extra taxes, at least partially, compensate for those social costs.

Since the mountains of research have shown cannabis has no significant harms, there is no justification for extra taxes on it. There are no social costs to compensate.

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