TOPICS > Economy

Cash Strapped California Towns Eye Tax Hikes for Medical Marijuana

October 14, 2009 at 12:00 AM EST
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With budget woes causing cuts to essential services across California, several communities in the state are weighing whether to raise additional revenue through tax hikes on medical marijuana. Spencer Michels reports.
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SPENCER MICHELS: In Oakland, California, this summer, 80 percent of the voters approved a measure to increase taxes on medical marijuana.

California is one of 13 states that permit growing and using marijuana for medical purposes. It’s been legal here since 1996. Hundreds of licensed clubs like this one in Oakland cultivate and sell packaged marijuana to smoke or to eat, including varieties called Purple Kush, Jack the Ripper, and White Widow.

The clubs pay a minimal business tax, $1.20 on every $1,000 in sales. The new Oakland tax is $18 on $1,000, a huge jump designed to raise money for the city in tough economic times.

City Council Member Rebecca Kaplan is one of the authors of the measure.

REBECCA KAPLAN: We expect to raise about $1 million or so next year from the tax as it gets implemented, and potentially more into the future. And what that means is 10 city workers who will be able to keep to jobs who would otherwise be laid off. That means park being maintained, libraries opened, the things that the community really needs.

SPENCER MICHELS: But Kaplan, an attorney, had other motives besides revenue.

REBECCA KAPLAN: Prohibition has been such a failure that, even when you don’t want people using it all the time or everywhere, regulation and control can be a better solution. So, the regulations in Oakland both bring in money for general public services, but they also allow us to control where they are relocated, when they are open, how they’re run. They have to have inspections.

SPENCER MICHELS: Dispensary owners like Richard Lee helped write and then supported the increased taxes, figuring that tying the cure for the city’s budget woes to marijuana was a way to legitimize the lucrative business of pot.

RICHARD LEE, Cannabis Club Operator: We see it as one more step toward being accepted as part of the community, as opposed to being seen as a problem that has to be shut down.

Popular vote for legalization

SPENCER MICHELS: Lee and others are aiming at legalizing marijuana for general use in California, arguing that a huge amount of illegal pot is already being consumed, some say a million pounds a year. Taxing it statewide could bring in $1.3 billion to help with budget shortfalls.

California Assemblyman Tom Ammiano introduced this year a bill to legalize pot. It has little chance of passage, but initiative campaigns along similar lines calling for a vote of the people may have better chances, according to Lee. He is sponsoring one of them to legalize cultivation and possession of small amounts of marijuana by adults and to allow cities to tax and regulate commercial cultivation.

RICHARD LEE: More and more people are for taxing and regulating cannabis, is because we are seeing the World War II generation be replaced by the younger generation, who have more experience with cannabis.

SPENCER MICHELS: Lee founded Oaksterdam University, a bit of Amsterdam in downtown Oakland, two years ago. The school trains hundreds of students to work in the marijuana business: growing, distributing and selling. It's a growth industry, as far as he's concerned. The school alone brings in $1.5 million dollars a year in tuition.

Lee addressed the new class.

RICHARD LEE: Well, I have been growing and selling cannabis for 19 years now. And, again, the reason I think I have been successful is because I have been about the politics.

SPENCER MICHELS: He finds federal and state efforts at wiping out marijuana plants in rural and increasingly in urban areas of the state to be folly.

RICHARD LEE: It seems stupid to be wasting our money, you know, trying to eradicate something that they're not -- you know, it's just getting more every year. The police say they can't even keep up with chopping it all down. And, then, on top of the money wasted, you know, fruitless, you know, trying to enforce prohibition, we're also not collecting tax revenue that we could be.

Marijuana abuse remains high

SPENCER MICHELS: But not everyone thinks taxes on pot are worth the trouble it will cause.

Scott Kirkland of suburban El Cerrito, near Oakland, chairs the California Police Chiefs Marijuana Task Force. He says marijuana abuse, like alcohol or tobacco abuse, will cost the society more than any taxes raised in Oakland.

SCOTT KIRKLAND: They voted for this initiative with the thought that they are going to increase coffers for their general budget. But are they going to set aside those amount of moneys necessary to treat those people that are abusing those substances? The cost is going to be prohibitive.

SPENCER MICHELS: Kirkland says there's more at stake, especially when marijuana today is more powerful than it was in the '60s and '70s.

SCOTT KIRKLAND: The majority of patients are using it to get high. It's a THC manufacturing plant. That's all it is right now.

SPENCER MICHELS: And what is the danger there, getting high?

SCOTT KIRKLAND: The -- the danger of getting high is not only, one, you're -- you're going to lose productivity of all the employees. When I look at the children, it affects them mentally.

SPENCER MICHELS: The federal government still outlaws marijuana, though Attorney General Eric Holder has said he won't raid dispensaries that abide by state law.

Meanwhile, California's Governor Arnold Schwarzenegger, while not supporting legalization, said recently it's time to debate the issue. Several states besides California are considering making marijuana legal and taxable.