California lawmakers nix temporary cannabis tax cut

SACRAMENTO - An effort to jump-start California's licensed marijuana retailers failed to clear a key legislative committee on Thursday, likely dooming its prospects for the year as the country's largest legal cannabis industry continues to flounder in the shadow of the illegal - and tax free - black market.

Prices for legal marijuana products are inflated in California by the 15% tax consumers have to pay at the cash register and a cultivation tax on growers of $148 per pound for the flower and $44 per pound for the leaves.

A group of state lawmakers, led by Democrat Assemblyman Rob Bonta, had hoped to temporarily lower the sales tax to 11% and suspend the cultivation taxes for 2½ years to help retailers compete with prices on the black market.

A Bonta spokesman said he had agreed to eliminate the sales tax portion of the bill in the hopes it would attract enough votes to get it out of committee and have a chance to pass. But the bill failed to clear the Assembly Appropriations Committee on Thursday, meaning it won't advance to the Assembly Floor and is likely dead for the year.

“I'm really disappointed,” said Tiffany Devitt, chief compliance officer for Santa Rosa-based CannaCraft, a cannabis manufacturer and distributor. “We're being crushed by the black market.”

It's possible lawmakers could revive it using legislative maneuvers later this year, but it's unclear if they want to do that. California's marijuana tax collections are not at all what lawmakers had expected after voters agreed to legalize the drug in a state with nearly 40 million people.

State officials estimate that if marijuana tax collections continue on their current pace - which is hard to predict because the industry is so new - the state will collect $270 million this year. That's $85 million less than initial estimates.

Last week, Democratic Gov. Gavin Newsom's administration lowered marijuana tax revenue estimates for the budget year that begins July 1 by $223 million.

“The taxes are so high that there is a big incentive to avoid them,” said Dale Gieringer, director of pro-marijuana group California NORML. “The black market is presently at least as large or larger as the legal market.”

State taxes are not the only barrier to California's emerging marijuana market. Industry advocates say local taxes and requirements on licensing and lab testing add up to make a legal marijuana business more expensive. Plus, retailers often don't have a place to put their money because most banks won't accept it because selling marijuana is still a federal crime.

Efforts to address the banking problem did survive the legislative deadline. The Senate Appropriations Committee advanced Senate Bill 51, which would create cannabis-limited charter banks and cannabis-limited charter credit unions. The law would allow those financial institutions to cash special-purpose checks.

“We can't sit by while the safety of legal business owners, their employees, and the general public are put at risk. SB 51 represents a first step in getting cannabis cash off the street and integrating these legal businesses into our economy,” Sen. Bob Hertzberg, D-Van Nuys, said in a news release.

Bonta's bill was among several proposals in the Legislature that stalled out Thursday after they did not make it out of committee.

Wildfire funding stripped

The Assembly Appropriations Committee also stripped $1 billion in funding from a bill sponsored by Assemblyman Jim Wood, D-Santa Rosa, to protect homes against wildfire through home improvements.

The move came after Democratic Gov. Gavin Newsom declined to commit to the spending last week. He's said he would work with the Legislature to find money and “we'll try to do our best.”

A spokeswoman for Wood said he'll continue fighting for spending.

Wood's proposal would have given $1 billion in financial assistance and rebates to people in high fire risk areas to harden their homes, such as by making their roofs fire resistant.

Californians can already get up to $3,000 to retrofit their homes if they live in earthquake zones.

Data privacy law blocked

Lawmakers blocked an effort to expand the state's sweeping new data privacy law, handing a victory to the tech industry as it faces mounting scrutiny over how it collects, stores and sells consumers' information.

The state that is home to Silicon Valley and tech giants such as Facebook passed the country's most sweeping data privacy law last year. The law gives customers the right to know what data companies are collecting from them as well as the right to delete and restrict the sale of that information. The California Consumer Privacy Act takes effect next year.

Attorney General Xavier Becerra and privacy advocates called on lawmakers to go further this year and give the public a right to take companies to court over violations of the law and to toughen how the state enforces its provisions.

Business groups and the tech industry fought the proposal, arguing it would create unnecessary lawsuits, and the Senate Appropriations Committee defeated it Thursday. It was the latest action in the political tug-of-war over consumer data amid mounting concerns about the influence of the tech industry and prevalence of data-driven technology in everyday life.

“The truth of the matter is the tech world is such a behemoth at this point in time, they have so much money, they have really been driving this whole discussion,” said Democratic Sen. Hannah-Beth Jackson of Santa Barbara, the bill's author.

Privacy advocates had rallied behind the idea of letting consumers sue companies over violations of the privacy act, such as when companies do not delete data when asked, arguing it would ensure accountability in the tech industry.

Under the California Consumer Privacy Act, consumers have few options for taking a company to court to enforce the law. Otherwise, it will mostly fall on the state of California to enforce the new privacy act.

Her bill would also have scrapped a provision that will require the state give a company 30 days notice to fix a violation of the privacy law before the attorney general pursues enforcement action.

No Election Day holiday

The Assembly Appropriations Committee voted Thursday to delay action for one year on Assembly Bill 177 that would have closed schools and given all state employees a day off on Election Day every other November.