California Legal Marijuana Tax Collection Miss Projections by 56%

California announced on Wednesday that the expected legal marijuana tax boom for the first 6-months had turned into a bust with $82 million in revenue versus a $185 million estimate.

Breitbart News reported in May that the California Department of Tax and Fee Administration collected only $32 million of state excise taxes and $2 million in cultivation taxes on about $213 million in sales in the first quarter under the voter-approved Proposition 64 recreational marijuana sales.

Although revenue through March was about one-third less than the projections in Governor Brown’s budget, California officials indicated the shortfall was due to a slow start-up and expected collections would catch up in the second quarter ending June 30.

But the California Department of Tax and Fee Administration announced that although second quarter marijuana tax collections rose to $43,490,668 for excise tax and $4,482,119 for cultivation revenue, total marijuana tax collection for the first six-months was less than half the already downward revised $175 million forecast from January.

The approximately $90 million shortfall for second quarter Prop 64 taxes payable by July 31, coupled with a huge $480 million sales tax miss, explains why the non-partisan Legislative Analyst’s Office warned on August 10 that the first month of California 2018-2019 Fiscal Year Budget missed projections by $248 million.

It is now highly improbable that California will collect anything close to the marijuana excise tax budget projections of $630 million in 2018-2019 and over $1 billion in 2019-2020.

Chairman of the California Assembly’s Business and Professions Committee Evan Low (D-Campbell) told the Associated Press: “After six months of legal cannabis sales, there is a staggering … gap between today’s tax revenue numbers and what voters were promised.”

With the national ‘Citizens Against Legalizing Marijuana’ (CALM) observing that less than 1 percent of marijuana grown in California has been licensed since the January 1 legalization, Assemblyman Low complained to AP: “Regulators must adapt before California’s lawful cannabis businesses are obliterated by the black market.”

But CALM argues that state legalization and regulation do not work, because California is still producing about 10 times the amount of marijuana than is consumed within the state. Most marijuana grown in California goes east where prices are higher.

With legal California marijuana subject to about a 4 percent cultivation tax, 15 percent excise tax, and 15 to 25 percent local tax, black market pot is about a third to half the price of legal marijuana.