A legal cannabis grower, whom we will call Mike Doe, contemplates his three greenhouses, now empty, in the mountains of Humboldt County. He and his parents spent many years growing marijuana illegally before it was legalized in california
His property is accessible by a small road that Mike has had to pay with his savings to comply with the law. It is obvious why Mikes’s parents chose mentioned property in the late 70s to cultivate cannabis. The giant trees and blueberry bushes that his parents grew among the marijuana plants hid the plantations in the eyes of DEA helicopters. Now Mike no longer needs to grow blueberry bushes to hide his plants as they are legal. In fact, he withdrew them when California became the first state to approve medical marijuana.
Since that time, Mikes’s farm has thrived in this area known as the Emerald Triangle and considered a pillar of California’s economy.
In a good season Mike gets around 550 kilos of dried flowers of first grade cannabis which makes him a profit of 1.5 million dollars. After paying all expences, Mike can earn around $ 100,000 in net income.
This profit has allowed him to buy his own house, have a retirement account and a university fund for children. His business should have improved for mike after voters approved legalization of recreational marijuana. But the opposite happened.
When his farm moved to recreational cannabis, his costs multiplied. Mike lost money last year and was forced to use money from his retirement and ande college fund of his children to avoid closing.
Mike is not the only grower that this has happened to, many growers from his area report the same… cannabis prices have drooped for more than 50% while the taxes and costs increased…
Many cannabis growers decided they cannot afford to remain in the legal marijuana markets
The high rates and the stricter rules along with the lack of access to bank loans have made Humboldt growers and Mendocino and Trinity counties have decided that they cannot afford to remain in the legal market.
Only 2,200 growers applied for cannabis licenses last year. It is a figure much lower than the 30,000 or more growers that existed at the time of the pre-legalization in the Emerald Triangle.
There is no data on how many have gone to the illegal cultivation of marijuana but it is known that 10 percent of producers have closed their business. But the worst has not yet arrived because it is estimated that this number will grow five times by the end of 2019.
The excessive regulations and the high costs of them make it almost impossible for the family business of recreational cannabis in this area. Many analysts believe that the era of cannabis in Humboldt, legal or not, is over.
Mike voted Proposition 64 thinking it would help growers. Now he thinks that he would not vote in favor again. When medical marijuana was legalized with the approval of the Compassionate Attention Act, some of the Humboldt growers did not want to register to vote and register because they had long considered the government an enemy.
With legalization of medical mariuana, marijuana became the crop with the most regulations in the country. Each plant has to be monitored through a central system called “tracking”.
So lets show the taxses on a exsample:
- Certificates for each area and water board fees can cost between $ 3,000 and $ 5,000. The biggest expenses are caused by the environmental and structural changes of the property.
- even if a farm has a perfect infrastructure, that does not exempt you from paying startup costs. This is the so-called “canopy tax”, which is a tax imposed by the county in which the farm is located in which a grower will harvest and which must be paid before starting the crop. and it cost was 3$ per square meter in 2018 if you have a 15000 shurae meter plot this is a lot of money.
- then there is a crop tax, a state tax on the amount of cannabis harvested before selling it and it does not matter whetheryou where able to sell your crop or not.
- state and federal income taxes – in 2018 Mike had to pay 300$ for each kilo of dried cannabis flower as crop tax at which point his 80 000$ of profit became a 15$ loss
A senior agricultural adviser in the county says that these growers are obliged to comply with rules and taxes that work with large producers but are the ruin of small family farms.
So what is being done in Humbold and what are consequences of past decisions?
For the first time, the Humboldt County government has decided to charge marijuana growers the harvest tax after harvest and not before. With this gesture he hopes that farmers can pay with their income.
In Sacramento, State Rep. Rob Bonta and California State Treasurer Fiona Ma introduced a bill called the “Draft Law to Reduce Temporary Tax on Cannabis,” which unfortunately was not approved.
The bill wanted to suspend some of the taxes for a period of 3 years so that the growers could get some initial capital.
Unfortunately, the economy of Humboldt County has been affected by the legalization of recreational cannabis. In fact, it lost income from sales taxes last year. In effect, last year total income fell by 2 percent in the period from 2017 to 2018, which is an amount of $ 424,000.
The Humboldt County Small Business Development Center conducted an unscientific survey of its members in June 2018. In this survey, many business owners selected changes in the cannabis industry as the reason for the economic decline above any other factor.
Cannabis producers have done a lot of good, such as donating money to restore the local Garberville school. But if things do not improve, many will leave. But many others will return to their origins: the illegal sale of marijuana.