High marijuana taxes could give California’s black market new life

A report from a credit rating agency suggests that California’s high tax rates on marijuana – which could reach 45% depending on local taxes – may result in an ongoing or even thriving black market for cannabis.

According to Fitch Ratings, the agency that compiled the report, “the existing black market for cannabis may prove a formidable competitor to legal markets if new taxes lead to higher prices than available from illicit sources,” The Washington Post reported.

Although consumers will pay only a 15% state excise tax and a cultivation tax, local governments can impose even more sales and business taxes, which could be “anywhere from 1 to 20%” on gross receipts, according to the newspaper.

If those taxes add up to make legal cannabis more expensive than black-market product, that could easily be enough to drive consumers to illegal dealers instead of spending their money at licensed retailers.