Illegal Pot Sales Soar in California as Government Stifles Legal Pot Industry

Illegal, black market pot sales were supposed to disappear once California legalized pot and the criminal element was supposed to go away after legalization. But now the illegal pot industry is thriving in this era of legal pot shops all because government is wrecking the pot industry and making it so expensive that criminals can sell it cheaper.

Recently the Sacramento Bee noted that government is making it too hard for the legal pot industry to thrive in the land of milk and honey.

“Unfriendly banks, high taxes and black-market competitors are some of the obstacles that licensed cannabis companies say hold them back as they try to cultivate a new industry in California,” the paper reported.

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Instead of the illegal market disappearing, it is growing stronger. In fact, it has gotten do bad that last year, then Gov. Jerry Brown proposed a new $14 million expenditure to help police track down and arrest black market pot dealers.

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As Vice recently reported:

So cities throughout the state—including Los Angeles, widely recognized as the largest legal marijuana market in the US—continue to grapple with a unsanctioned industry. Six months into legalization, LA remains besieged by illegal businesses, said Adam Spiker, executive director of the cannabis trade group Southern California Coalition (SCC).

“It’s still a majority of the market,” said Spiker. “There’s no doubt about it.”

So, why is this happening? Government is why.

The new regulations and taxes simply make it cheaper to buy pot from illegal sources.

Vice continued:

One reason is—as many predicted—the cost of legalization is daunting for would-be cannabis entrepreneurs. There are a slew of financially demanding requirements borne out of regulation, including required building and security upgrades, as well as attorneys’ fees to ensure compliance. There’s also operating costs that the illegal weed industry has never had to deal with, like having to pay workers’ compensation and pass pesticide testing standards required by the state.

Then there’s hefty taxes, which include a 15 percent excise tax in addition to sales tax and local fees that some say discourage customer spending and encourage illegal sales, where profit margins are wider. A bill introduced earlier this year in Sacramento proposed slashing the excise tax to 11 percent to help permitted businesses compete with illegal operations, but that effort was shelved in May.

Once again we see that government ruins about everything it touches.

Follow Warner Todd Huston on Twitter @warnerthuston.

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