Advocates say that reducing California's cannabis taxes would hurt low-income youths.

LOS ANGELES — Concerns that California’s marijuana industry is too taxed and at the edge of collapse have led to youth and children’s advocates saying that cutting marijuana taxes could threaten desperately needed social services programs.

As they struggle to keep up with rising operating costs and regulatory costs, small cannabis farmers and owners repeatedly ask the state for reforms to the tax system.

The flat rate for cannabis taxation is $161 per pound as of January 1, along with a 15% excise tax and local cultivation, processing, distribution, and retail taxes. In the first three quarters 2021, the state collected almost $1 billion in cannabis taxes revenue.

Last month, Governor. Gavin Newsom stated that he supports cannabis tax reform and plans to work with lawmakers to modify policies. Lawmakers also supported the industry, and at least one bill has been proposed to change the existing structure.

Because their programs heavily depend on funds collected from Proposition 64 (the 2016 ballot initiative which legalized recreational cannabis in California), service providers for at-risk youths and low-income families say they are opposed to any cuts.

Mary Ignatius (statewide organizer of Parent Voices California), said Wednesday that while we have heard much about the effects on the cannabis industry, we have not heard anything about the impact on those who benefit from these taxes.

Marianna Hernandez is a Prevention Manager at Community Coalition. This advocacy and social justice organization is based in South Los Angeles. She said that cutting services would be an insult to people who are disproportionately affected from the “war on drug.”

She said that South L.A. was once too criminalized for marijuana use, sale, and possession. “To strip the community from the tax revenues is quite frankly an insult to South L.A. Black residents, many of whom still have relatives incarcerated due to marijuana-related offenses.”

Nearly $400 million of revenue from California’s marijuana taxes will be used to fund child care and preventive services for thousands more children living in poverty in the state budget for fiscal 2021-22. This includes nearly $279 million in child care funding for the Department of Social Services and $81 million to youth prevention programs funded by the Department of Health Care Services.

Ignatius stated that more than 21,000 children of low income across the state are eligible for child care services programs. However, there could be as many as 2.3million.

She stated that Prop 64 dollars are crucial because of this. “Any reductions in cannabis tax rates will lead to cuts in child care for most children of color who live in poverty and need it now more than ever.”

However, California is moving to repeal cannabis taxes.

The San Diego City Council voted Tuesday in favor to lower the city tax on new production plants from 8 percent down to 2 percent. This is in the hope of encouraging more indoor factories and farms to move to the area.

The same day, Mike McGuire , a state senator, introduced a bill to eliminate California’s 15% cultivation tax effective July 1, and increase the excise taxes by an amount that would only generate half of the revenue that the cultivation tax would have generated.

McGuire’s office didn’t immediately respond Wednesday to a request for comment.

Jim Keddy, the executive director of Youth Forward, stated that more reform bills will likely be introduced in the next year, which could pose a threat to services for communities hardest hit by poverty and mass incarceration.

Keddy stated that cannabis tax revenue plays a critical role in child care funding. However, it also provides funding for services for the formerly imprisoned, youth prevention services and job training for communities of color that have been affected by the war against drugs.

He said, “In downturn year, kids living in poverty, children of color, those programmes get cut.” This is why the revenue stream is so important now.

Keddy was one of many advocates and service providers that sent an open letter to Newsom this week, asking them to reconsider the state’s cannabis tax system.

They warned that “if we are able to convince state leaders to lower or suspend tax rates, which was approved by voters in Proposition 64,” we will immediately see a negative impact on thousands upon thousands of children who live in poverty and children of colour in our state.”

They wrote that any reduction in cannabis taxes would directly affect the most vulnerable communities of our state and will increase racial as well as economic inequalities. “We are against the proposal of the industry and ask you to consider the impact of the policy on children, youth, and families.