In the case of California’s legal cannabis industry, the state government had its Moment of Truth. This came with respect to the state’s legalization of recreational cannabis at the beginning of 2018.
This was supposed to give effect to the will of the voters, who approved legalization by ballot in the 2016 election. At that time, California’s state government had a choice.
It could move forward with its cannabis legislation. Or, it could move backwards. California’s government chose the latter.
As noted, the state government has literally done “everything” wrong in legalizing cannabis. But one failure in particular is now coming back to haunt not only California’s politicians and residents, but all Americans.
This was the (cowardly) decision by state representatives to make legalization merely permissive. This allowed California’s counties to opt in – or opt out – of cannabis legalization.
It was a cowardly decision because it placed the onus on local politicians to decide whether or not to reflect the will of the voters. The state government dodged responsibility to the greatest degree possible.
At the beginning of 2018, over 80% of California’s counties opted out. This preserved the cannabis black market in California.
The consequence? California’s cannabis black market actually got larger, not smaller, following full legalization of cannabis.
At first glance, this may seem like a mathematical impossibility. But never underestimate the capacity of politicians to exceed conventional parameters with their stupidity.
Here’s how this works.
With cannabis being gradually legalized state-by-state, this is legitimizing the use of cannabis among Americans previously frightened off by full Prohibition (and all the anti-cannabis propaganda). As a result, cannabis consumption is soaring in all U.S. states – whether or not the state government has legalized it yet.
Americans are buying more black market cannabis, inside and outside California. Legal cannabis companies are prevented by law from exporting cannabis to other states (even cannabis-legal states). But the cannabis black market can ship their weed wherever they want.
With California having an especially friendly climate for cannabis cultivation, it’s a major supply source for illicit cannabis across the country. The black market is thriving in this state – thanks to the state government.
A new article from CBS News illustrates the degree of folly here.
Our guide was Mendocino County Sheriff Tom Allman. He's been chasing marijuana growers for 35 years…
Sharyn Alfonsi: So, the backers of Prop 64 said three things, right? First they said, "We're gonna raise a half-billion dollars in tax revenue." Has that-- has that happened?
Tom Allman: (LAUGHS) No… no.
Sharyn Alfonsi: They said, "It's gonna eliminate the black market." Has that happened?
Tom Allman: The mar-- the black market has greatly increased.
Sharyn Alfonsi: Has increased.
Tom Allman: Absolutely…
There's so much illegal weed in areas that are so remote, they have to haul it away by helicopter. Allman says he only has the manpower to get rid of about 10% of it.
So what happens to the rest? We learned much of it is being smuggled east to the 39 states where pot is still illegal and prices are three times higher than in California.
Sharyn Alfonsi: So, the backers of Prop 64 said three things, right? First they said, "We're gonna raise a half-billion dollars in tax revenue." Has that-- has that happened?
Tom Allman: (LAUGHS) No… no.
Sharyn Alfonsi: They said, "It's gonna eliminate the black market." Has that happened?
Tom Allman: The mar-- the black market has greatly increased.
Sharyn Alfonsi: Has increased.
Tom Allman: Absolutely…
There's so much illegal weed in areas that are so remote, they have to haul it away by helicopter. Allman says he only has the manpower to get rid of about 10% of it.
So what happens to the rest? We learned much of it is being smuggled east to the 39 states where pot is still illegal and prices are three times higher than in California.
In short, if California’s state politicians had wanted to support the cannabis black market (rather than phase it out), they couldn’t have possibly done a better job.
Here additional context is also necessary. Taxes on legal cannabis products in California range as high as 45% (according to CBS News), making it impossible for the legal industry to compete with the black market on price. And additional state red tape is adding so many extra costs to doing business that many legal operators struggle to turn a profit.
This became clear when CBS News spoke to “illegal” cannabis cultivator, Casey O’Neill. The O’Neill clan has been growing cannabis on their family farm since the 1970’s, but is trying to enter the legal industry.
Casey O'Neill: So when you factor in consulting fees – you know, I just did a back of the napkin calculation that over the last three, four years, I'm well over $50,000 into it.
Sharyn Alfonsi: $50,000--
Casey O'Neill: Yes.
Sharyn Alfonsi: --for what, permits?
Casey O'Neill: For-- for permits, for consulting-- $2,500 a year for the water board discharge permit. It's $750 a year for the pond permit. It's $1,350 application fee to the county, plus another $675 when they actually give you the permit, annually.
Sharyn Alfonsi: For a farm this size-
Casey O'Neill: For a tiny-- for the-- the-- the smallest farm that there is. And-- and that's one of the problems, is that--
Sharyn Alfonsi: So what does that do to your profits?
Casey O'Neill: The - what profits?
Sharyn Alfonsi: You are not making any money right now?
Casey O'Neill: No.
Sharyn Alfonsi: $50,000--
Casey O'Neill: Yes.
Sharyn Alfonsi: --for what, permits?
Casey O'Neill: For-- for permits, for consulting-- $2,500 a year for the water board discharge permit. It's $750 a year for the pond permit. It's $1,350 application fee to the county, plus another $675 when they actually give you the permit, annually.
Sharyn Alfonsi: For a farm this size-
Casey O'Neill: For a tiny-- for the-- the-- the smallest farm that there is. And-- and that's one of the problems, is that--
Sharyn Alfonsi: So what does that do to your profits?
Casey O'Neill: The - what profits?
Sharyn Alfonsi: You are not making any money right now?
Casey O'Neill: No.
California’s folly is also a major contributor to the regulatory failure and health problems surrounding tainted vaping products.
The federal government bears primary responsibility here. Its shoddy regulation of tobacco vaping products and its failure to already legalize (and regulate) cannabis is the direct cause of these illnesses/deaths.
However, California’s state government has made a bad situation worse through its own cowardly approach to cannabis legalization. In addition to being the nation’s largest source for black market cannabis, California is also the nexus for illegal vaping products according to Leafly.
While California’s state government is killing its own legal cannabis industry, it also bears great responsibility for killing Americans with tainted vapes. Yet the state government remains intellectually bankrupt when it comes to attempting to undo its enormous mistakes.
Proving this, the state government has now turned back the clock a quarter century. It has launched a heavy-handed “War on Drugs” style law enforcement campaign against its cannabis black market.
It’s a very extravagant use of tax dollars. It is also 100% futile.
Casey O'Neill had further insights to offer here.
Sharyn Alfonsi: So what happens, if the National Guard shows up and here come the helicopters descending on the hills of the Emerald Triangle?
Casey O'Neill: It's the same as it ever was--
Sharyn Alfonsi: What happens six months later?
Casey O'Neill: What happens the day after they leave? People replant.
Casey O'Neill may be right. Six weeks after that raid we went on, cops went back to the exact spot and found 1,100 brand new marijuana plants. [emphasis mine]
Casey O'Neill: It's the same as it ever was--
Sharyn Alfonsi: What happens six months later?
Casey O'Neill: What happens the day after they leave? People replant.
Casey O'Neill may be right. Six weeks after that raid we went on, cops went back to the exact spot and found 1,100 brand new marijuana plants. [emphasis mine]
The California government has completely bungled cannabis legalization. And it can’t even begin to fix this broken model for legal cannabis.
Before the state government can start to undo all of the harm it has caused, it first has to acknowledge its own (huge) mistakes.