Following unanimous approval from the Long Beach city council, the Office of Cannabis Oversight will begin to establish a plan to lower taxes for recreational and medical cannabis use. The lower tax rates will be established as part of the 2024 annual budget.
The city is hoping to increase tax revenue from cannabis use in Long Beach, as cannabis use contributed more taxes in 2022 than oil. Last year, Long Beach received more than $13 million towards the general fund and the city is expecting at least $12 million in 2023. That revenue money helps to fund city services such as homeless outreach, equity programs, park maintenance, language access, the health department and more.
“We should be aiming to create a positive feedback loop: reduce the tax burden on local operators, allow them to be competitive and expand their businesses, while rewarding those high road employers and operators who make investments back into our community, all while nurturing a new revenue source for the city,” said Councilmember Joni Ricks-Oddie, who brought the item forward with Suely Saro and Cindy Allen.
Staff also hopes to even the playing field between legal and illegal cannabis sellers, as the illegal cannabis market is estimated to be three times larger than the legal market in California. In Long Beach there are 32 retail cannabis stores and 37 cultivators, or growers.
Since recreational and medical cannabis use became legal in California in 2016, the tax rate in Long Beach has been at 8% for recreational sales, 6% for medical-use sales, 1% for lab testing receipts and $13.70 per square foot of canopy under cultivation. There is also a 10.25% general sales tax in California.
“Our current cannabis tax structure makes it difficult for our legal operators to compete with the elicit operators that are able to dodge not only the cannabis tax, but also the local sales tax,” Ricks-Oddie said. “Nurturing a thriving cannabis industry is crucial to building out our local economy.”
Lowering the tax rates are expected to cause an increase in legal cannabis sales, which will increase the tax revenue overall.
The city is hoping to follow Santa Ana’s lead with tax relief by prioritizing businesses that are considered “high road,” meaning they contribute to the community, give their workers more than minimum wage or provide career opportunities. Other qualifications to receive a reduced tax rate include: offering the majority of workers full-time hours, assuring delivery drivers are reimbursed for using their vehicles and hiring at least 40% of their workers from low-income communities.
Santa Ana implemented a 1% tax reduction for most cannabis stores in the city and an additional 2% for “high road” employers.
“For decades, low-income communities have been directly impacted by the War on Drugs and many have been penalized,” said Sheyla Diaz. “Lower tax rates for the businesses that take care of their workers and the community will help to make sure that Long Beach workers thrive in this industry.”
While the crowd inside the council chambers clapped and cheered after each public comment, some residents expressed frustration with the city waiting until next year to implement the tax reduction, saying that they deserve more drastic reductions at a sooner time.
“The only way we’re going to compete with the black market is by beating the black market and we need to lower the tax,” said Change Im. “The culmination of the taxes is crushing us, we’re taxed at every level. It’s not ‘lower the tax so we can make more money’ it’s ‘lower the taxes so we can keep our businesses afloat and keep paying our employees.’ Time is running out, we don’t need symbolism, we need policy. Let’s bring it down 4 or 5%.”
Many residents pointed out that the equity program to support cannabis stores from low-income, justice-impacted residents has only resulted in one successful equity applicant and asked the city to do more for those prospective businesses.
Adam Hijazi, owner of the Long Beach Green Room said that Long Beach can do more than reducing tax rates in order to support legal cannabis businesses and create a cannabis destination in the city.
“We have to be able to reimagine the industry and what it could be, what it could do,” Hijazi said. “Part of that is taxes, but it’s not the whole thing. Liberalize some of these licenses, like for example events and consumption lounges and other ways to be able to make Long Beach a hub in a responsible manner for cannabis consumption.”
The Long Beach city council approved the measure unanimously.
not bad, they decided to increase their profits due to this, and then also make money on rehabilitation centers, which I will open very quickly there.