Cali Legalized Pot, Then Regulated It So Much That Growers Are Returning To The Black Market

P. Gardner Goldsmith | January 1, 2023
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In their zealous drive to create a command-and-control “utopia” via state and local government edicts, California leftists appear incapable of learning from their past mistakes.

Even as the state readies to enforce a cadre of new statutes that will decrease individual liberty and harm free market exchange, they refuse to recognize that this same authoritarian, money-grabbing mindset already has undermined what could have been a long-term fiscal success: the legalization of marijuana.

Since “recreational” use of pot officially was decriminalized in 2017 and dispensaries and growers were “allowed” by the “Department of Cannabis Control” to go operational in 2018, the legal weed market has flourished. By 2021, California’s marijuana market had become the world’s largest, pulling in $5.2 billion.

But something was happening behind the scenes of the “free” market in pot: politicians wanted in.

The years passed, and the demand incentivized suppliers, as demand always does, and the success gave politicians the munchies to impose higher and higher taxes and to impose their proverbial will on the growers and sellers. The result? As Kevin Rector reports for the Los Angeles Times, it’s a new black market.

And the thud of “DUH” echoing in the minds of sensible folks who suspected the bureaucrats and politicians couldn’t avoid their acquisitive nature.

In a piece entitled, “‘The War on Drugs Part II’: California taxes, rules are killing small legal weed farms,” Rector reveals that “wars” on things come in all shapes and sizes. And while pot might be legal in the Golden State, actual freedom to grow and sell it as one wishes is not. In fact, the “regulatory” and tax burdens are so steep, people with small businesses in the marijuana market are seeing the sense of going back to “illegal” sales.

Rector describes the plight of small business owner Johnny Casali, who, as a teenager growing weed illegally in the mountains of Northern California, was always at risk of government attack.

“In the 1990s, dozens of federal agents raided his family’s Humboldt County farm, and Casali spent eight years in federal prison.”

But, in 2018, the omniscient politicians of California finally agreed that very thing that was so “evil” when Casali was younger was, well, suddenly no longer long as you did it the way the politicians said you could.

“Today, weed is legal in the state and Casali grows it openly on his family farm. Law enforcement helicopters don’t fly over as often, and there’s not much risk of another raid.

Still, the government threatens his livelihood, Casali said.”

Indeed. Often, journalists employ the “go from the colorful anecdote to the abstract idea” motif when writing a story, and it can become tiresome. But, in this case, reporter Rector does us a service, showing us a real person trying to make a living – a peaceful man being driven back into so-called “criminality” by the criminal, threatening, mob-like behavior of the state.

Writes Rector:

“In place of handcuffs and prison sentences to deter cannabis cultivation, the state has established a vast system of taxes, fees and regulations to control it. The taxes are steeper and the rules more onerous than those in other agricultural sectors. Casali and other small California cannabis farmers say they are increasingly impossible to comply with given the glut of weed on the market and the plummeting price per pound of wholesale pot.”

How many times did leftist Democrats who grudgingly came to the side of decriminalization say it should be “legalized… and taxed, and regulated”? How many times did politicians equivocate about actually allowing FREEDOM because they saw a golden goose in the pot fields, ready to lay its THC-laden eggs?

Thus, their version of “freedom” was packed with taxes and regulations.

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In California, the course of things was predictable, almost as if scripted in one of the studios where I once worked.

“In addition to paying cultivation and excise taxes, state licensing fees and other upfront costs, legal cannabis farmers have been forced to comply with intense tracking and testing regimens and an array of bureaucratic rules that dictate how they can farm their crop — some of which state officials have conceded are excessive and have begun to walk back. One that the state eliminated had required farmers to weigh every one of their plants individually. Another restricted outdoor farmers’ use of “light deprivation,” a traditional farming method to limit the amount of sunlight plants get in the field.”

Seriously. Imagine sitting in the halls of the California Assembly and suffering through the jawboning of stuffy, aristocratic and demagogic politicians as they huff and puff and pontificate about running the minute details of businesses owned and run by people whom they will never meet. Continues Rector:

“Licensed cannabis farmers in California face heavy restrictions on how they sell and market their products. They generally can’t sell directly to consumers, and legal cannabis can’t be sold after 10 p.m. or to those younger than 21.”

You get the drift.

It’s the stench of busybodyism and theft, and, like many who are now considering going off-grid and out of the California government’s target-hairs, it’s hit Casali hard, each year, his business suffering more and more under impositions like:

“…special cannabis taxes and regulations, such as $11,800 in state licensing fees; $7,000 on required testing for factors like potency; $5,375 in county excise taxes; $5,000 on a nursery license; $3,000 on mandatory ‘track and trace compliance costs; and $1,000 on a special transportation license to move his product to distributors…”

And so, if you are a small farmer with small margins, you’re in trouble. Conversely, if you are part of a giant conglomerate corporation, you stand to gain, by imposing costs the little guys can’t handle.

“Kevin Jodrey, of Wonderland Nursery, said the state’s cannabis rules had empowered massive companies to move in and take over the industry while small farming communities that have been cultivating cannabis for generations have been left to die.”

And the “rules” (a.k.a., government threats) also have hit cannabis-related businesses that might not be selling the plant to smoke. Wendy Kornberg operates one such business, and she “…said she was doing great until the state’s legalization replaced its largely unregulated medical cannabis model.”

Rector spells out the nightmare the state imposed on her:

“In addition to all the new competition, Kornberg said, the state’s new rules and licensing fees around manufacturing and retailing made it too costly for her to continue selling the THC-infused topical products and tinctures she had perfected. Rules for tracking and tracing every bit of plant she produced began gobbling up her time, as did getting county permits to build a new water retention pond for watering her cannabis crop. Without buying a nursery license, she couldn’t sell her seeds.”

All of this means sellers either increase costs for consumers on the legal market, or they sell on the black market, which, itself, includes its own costs and retards open competition.

Once, statisticians expected the “legal” pot industry to outperform the “black market” in California by 2024. That no longer seems so certain. Just as it was in the 18th Century, when British taxes on things like molasses inspired black marketeers such as John Hancock to flout the so-called “law,” these utopian ideas from on high tend to backfire today.

It’s the kind of thing author Ursula K. LeGuin detailed in her novel “The Lathe of Heaven.” As a scientist repeatedly tries to make the world operate the way he wants it to, his mandates create unintended consequences. His hubris leads to the near-destruction of Earth.

It’s not at that level in California, of course, but for these victims of political theft and coercion, their worlds are collapsing and the strongest alternative, ironically, is a return to the black market that existed before government jackals smelled tax cash and regulatory power in the “evil weed.”

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