Tax Cuts Won't Be Enough to Curb California's Cannabis Black Market

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February 26, 2019

By Chloe Aiello

Temporary tax cuts for California cannabis growers and sellers won't address systemic issues feeding the state's black market, said John Oram, CEO of California-based cannabis company Bloom Innovations and its subsidiary NUG.

"The issues are larger and more systemic than [taxes]. It's really the lack of licensing, the slowness of licensing, that makes the big issue, so the market has constricted considerably in the year," Oram told Cheddar on Tuesday.

California Democrats have proposed temporary measures to strike down a thriving black market that claims an estimated 80 percent of marijuana sales annually, according to New Frontier Data, including short-term tax cuts for sellers and tax suspensions for cultivators. A bill sponsored by Oakland Assemblyman Rob Bonta, among others, proposes cutting the excise tax from 15 percent to 11 percent, and suspending the $148 per pound cultivation tax for three years.

Oram, whose company is a vertically integrated marijuana producer, said those hefty taxes were the "pinch point" on a challenging first year after legalization, so the cuts will "go a long way." But he said prohibitive regulatory requirements and market contraction are also contributing to the black market's growth. With far fewer dispensaries operating today than there were prior to legalization, customers may be turning to alternative sources for cannabis.

Oram said Bloom works to keep its own product competitive against the black market by focusing on quality and compliance, adding that the company has the advantage of being vertically integrated. The company's wholesale products are currently in about 80 percent of dispensaries across the states, and it will sell its own NUG-branded products when it branches into retail within the week.

"If the state does expedite licensing and give some temporary reprieve on taxes, I am confident the market will open back up," Oram said.

For full interview click here.