The San Diego, California City Council on Tuesday voted to reduce the tax rate on cannabis production facilities from 8% to 2% despite budget analyses suggesting the city would lose between $2 million and $4 million over the next five years by lowering the tax, according to a San Diego Union-Tribune report. The tax rate reduction does not include dispensaries, which will still pay the 8% rate.
The reduction comes as just 19 of the 40-city approved cannabis production facilities have opened, which has created local supply chain gaps, led to the creation of fewer jobs, and greater opportunities for unregulated sales.
Gina Austin, the leading attorney for the region’s cannabis industry, said the Independent Budget Analyst report was based on the flawed assumption that approved-but-unopened cannabis production facilities would eventually open without a tax cut, which she said was “absolutely not true.”
“They do not intend under any circumstances to stay here if the tax rate does not decrease.” – Austin to the Union Tribune
Councilmember Monica Montgomery Steppe, who opposed the changes, said she has a “major, major issue with reducing the tax rate for an industry that we have not opened up to everyone.”
Critics of the city’s cannabis rules have long complained that it still doesn’t have a social equity program, the report says, although city officials have maintained that the program would be in operation sometime this year.
Councilmember Joe LaCava proposed delaying the date of the tax reduction from May 1 to January 2023 so that the equity program will be in place, but the proposed amendment didn’t receive enough support. Another amendment that would have added a three-year sunset clause to the reduction also did not receive enough support.
The proposal still requires second approval from the council. That vote is expected next month.
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