The Los Angeles Times this morning reports on a series of taxes and fees scheduled to go into effect next year in California when recreational marijuana becomes legal. These assessments, the story says, “could influence where it’s grown, how pot cookies and other munchies are produced and the price tag on just about everything.”

“On a retail level,” the Times writes, “it costs about $35 to buy a small bag of good quality medical marijuana in Los Angeles, enough to roll five or six joints. But in 2018, when recreational sales take hold and additional taxes kick in, the cost of that same purchase in the new market is expected to increase at the retail counter to $50 or $60.
At the high end, that’s about a 70% jump.”

It is all part of what the Times describes as “California’s sprawling plan to transform its long-standing medical and illegal markets into a multibillion-dollar regulated economy, the nation’s largest legal pot shop. The reshaping of such an expansive illegal economy into a legal one hasn’t been witnessed since the end of Prohibition in 1933.”

But it won’t be a simple evolution, because communities need to be able to “issue business licenses, which are needed to operate in the new market.” At the same time, “big gaps remain in the system intended to move cannabis from the field to distribution centers, then to testing labs and eventually retail shops.” And, local governments apparently are free to add their own taxes and fees to those being assessed at the state level.

KC's View: It sounds so complicated and demanding that people are going to need to get high just from filling out the paperwork.

On the one hand, I’m wondering how long it is going to take for mainstream, traditional companies to get into this business. I think it is inevitable … and just a matter of timing.

Which leads me to my second point - in the short term, I’d be a little careful about depending too much on this tax revenue. The Trump administration, and especially current Attorney General Jeff Sessions, have been hostile to the notion of marijuana legalization, and could create a legal face-off between states and the federal government.