While we applaud Virginia for taking this first step, the current framework set up by the legislation has the Commonwealth going down a dangerous and counterproductive path many other states have unfortunately taken. For example, high taxes and overburdensome regulations in California’s legal marijuana industry have resulted in high costs, cronyism, and the proliferation of the black market. Fortunately, Virginia lawmakers have an opportunity this legislative session to “Un-California” its cannabis market before it opens for business.
The current reform plan in Virginia would impose heavy state and local excise taxes (21% state, up to 3% local), plus state sales tax as high as 7% and local “meals” taxes up to 7.5%; not to mention annual fees doled out by the “Virginia Cannabis Control Authority.” Unsurprisingly, when California enacted their legal cannabis laws, they implemented a heavy tax structure, including a 7.25% state and up to a 3.5% local sales tax, a 15% excise tax on retail shops, and heavy taxes on farmers. These taxes can add 50% or more to the final price.
This has resulted in the black market being able to outcompete the legal one. It’s estimated that in California, $8.7 billion worth of cannabis products are purchased from non-legal sources and that 75% of the cannabis market is still controlled by unlicensed dealers. It’s gotten so bad in California that some localities have suspended their local taxes in order to allow legal retailers a fighting chance against their illicit counterparts.
In contrast, Michigan went with a much more reasonable taxing structure when they legalized their cannabis market. The most recent data shows that the state was able to capture over 60% of the market share in the first year alone. This also means that more Michiganders are purchasing cannabis products that are regulated and tested for safety and quality.
Virginia lawmakers should also take another lesson from other states like Florida and Nevada who have allowed cannabis oligopolies to control their state’s markets due to anti-competitive regulations and licensure limits. Arbitrary licensure limitations create less competition and poorer quality products – as well as breed corruption. As a 2020 Politico article stated: “These practices effectively put million-dollar decisions in the hands of … the mayors and councilors of small towns and cities, along with the friends and supporters of politicians who appoint them to boards. In Nevada, where 130 retail licenses were up for grabs, large campaign contributions were doled out to County Commissioners responsible for shelling out these licenses just before applicant hearings. Virginia’s proposed law contains licensure caps from farming to retail. The proposals also contain no mechanism for this number to increase as Virginia’s population and economy grows, meaning the licensure scheme will become more problematic as the years go on.
Virginia’s current proposal also allows a license to be denied to an individual if they have been convicted within the past seven years of a “crime of moral turpitude” which is as vague as it sounds. This means that many of the roughly 1.6 million Virginians with a criminal conviction on their record, many of whom carry that record due to criminal enforcement of marijuana prohibition, would be left out of the market based on someone’s judgment call as to whether the crime is one of “moral turpitude.” Employment is one of the most important factors in whether someone will be successful after reentering society from the criminal justice system. Certainly, some violent crimes and offenses that have a direct relationship to the job should be considered by the licensing boards, but “moral turpitude” exclusions create unnecessary barriers for those trying to contribute to society as well as increase their chances to commit future crimes.
Virginia’s legislative session creates a perfect opportunity to re-examine the future of the cannabis market in the state. We hope lawmakers take note of the lessons learned from other states and revisit the current plan instead of leaving it unchanged.
Currie Myers is the retired sheriff of Johnson County, Kansas. Jacob Fish is the Deputy Director of Americans for Prosperity-Virginia.