San Diego, home to one of the largest municipal cannabis markets in California, is lowering tax rates on local manufacturers and growers in an effort to boost production overall.
Despite a projected revenue shortfall because of the tax break, the City Council voted 6-3 to lower the rates for marijuana producers and growers from 8% to 2%, the San Diego Union-Tribune reported.
However, the 8% tax rate for retailers will remain intact.
The move was in response to industry insiders who have contended for years that high state and local taxes have discouraged companies from participating in the legal market, all while the illicit market continues to thrive.
To date, only 19 of 40 municipally approved manufacturers and growers have begun operations, which has forced local marijuana retailers to find inventory from outside the city limits, the Union-Tribune reported.
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Though a city analyst told the Council that lowering taxes in such a way will likely cost San Diego $2 million-$4 million over the next five years, supporters of the cut argued that the move will result in increased sales and therefore increased tax revenue because it will incentivize the 21 unopened businesses to open their doors.
San Diego is the latest in a string of California localities to lower or pause cannabis taxes in response to industry outcries, joining Long Beach, Oakland, San Francisco and Humboldt and Monterey counties.