Medical Marijuana touted as Cure for Cities' Budget Woes

July 26, 2009 – Oakland attracted national attention last week with the country’s first voter-approved medical marijuana business tax — a 15-fold increase that won 424696968_4b9269d301easy victory in a special election Tuesday.

Some supporters — including some operators of the dispensaries that will be taxed — see the measure as a step toward legalizing marijuana. Cities with dispensaries are eyeing the move as a way to fill empty municipal coffers in the wake of crushing local and state budget deficits, and to standardize their approach to medical marijuana outlets.

Other California cities, including Berkeley, San Francisco, Santa Cruz and Los Angeles, have all discussed a tax on medical marijuana or have plans to pursue a tax.

“It’s just smart economics,” said San Francisco Supervisor Ross Mirkarimi. His District 5 includes four of the city’s 16 licensed outlets; estimates of overall outlets number as many as 40. “It is a progressive tax on a widespread practice and a readily accessible product.”

California dispensaries generally pay license and registration fees, as well as payroll and state sales tax.

The Oakland pot club levy raises an additional $16.80, for a total of $18, for every $1,000 of medical marijuana sold by taxing overall gross receipts. It could begin generating an additional $294,000 a year for the city when it takes effect Jan. 1.

To impose a similar tax, San Francisco would have to create a gross receipts tax for
pot clubs — a plan that Mirkarimi said he sees coming before supervisors this year.

The board shelved a similar plan 31/2 years ago, he said. But it was encouraged to dust off the legislation because the Obama administration announced that federal agencies would not continue raids in states where the use of medical marijuana has been legalized. Such raids were actively pursued during the presidency of George W. Bush.

The new stance opened up the idea of a tax for other cities, as well. Los Angeles City Council members brought forth a motion July 15 to explore a tax on legal medical marijuana sales.

“A tax on medical marijuana could enable the city to continue providing services we might otherwise have to cut,” Councilwoman Janice Hahn told reporters.

But hurdles remain before the measure can advance, including the need for a permanent ordinance regulating dispensaries, expected to be finalized in October, officials said.

An estimated 600 to 800 dispensaries operate in Los Angeles in addition to the 186 that were registered before a 2007 moratorium.

Berkeley council members also have discussed a motion similar to Oakland’s. But the idea “just hadn’t crystallized,” said Councilmember Kriss Worthington, whose District 7 includes a dispensary on Telegraph Avenue.

Likewise, Santa Cruz lawmakers have been receptive to a tax on dispensaries but have no formal plans, Councilmember Mike Rotkin said.

He called the tax a “no-brainer” even though the Santa Cruz City Council is on the verge of approving a temporary freeze on marijuana clubs in the city.

Two clubs are now licensed to operate in Santa Cruz. A few more might be acceptable in the future, but Santa Cruz doesn’t want to become the pot center for the area, Rotkin said.

But having so few clubs would minimize the revenue a tax could generate, he said.

“The tax is just an additional benefit,” Rotkin said. It shows support for medical marijuana, he said.

“And anything that brings back more money to the city will be attractive,” he said, “even if it’s a small amount.”

On the state level, Assemblyman Tom Ammiano, D-San Francisco, introduced a bill this year to legalize and tax marijuana. The bill could generate nearly $1.4 billion in revenue for the cash-strapped state, according to an analysis by California tax officials.

In addition, a group of California criminal defense attorneys submitted a pot legalization measure to the state Attorney General’s Office. The “Tax, Regulate and Control Cannabis Act” needs 443,000 signatures to be included on the November 2010 ballot. The bill is backed by Oakland dispensary operator Richard Lee.

The legislation would not completely resolve the federal-state stalemate over marijuana, which the nation’s drug czar, Gil Kerlikowske, said the federal government will not support legalizing. Kerlikowske, director of the White House’s Office of National Drug Control Policy, made the comments Wednesday in Fresno, where agents seized $1.26 billion worth of pot plants and arrested 82 people in 10 days, according to the Fresno Bee newspaper.

Nationwide, police arrested a record 872,721 people for marijuana violations in 2007, according to the FBI’s annual Uniform Crime Report.

Worthington applauded Oakland for being the first city to pass the medical marijuana dispensary sales tax. The motion to tax Berkeley’s three dispensaries would have to wait until the 2010 election because running a special vote for one measure is too expensive, Worthington said.

He predicted widespread acceptance for a similar measure among Berkeley voters judging by their support for past legislation that eased marijuana laws and the perception that the “war against drugs is a waste of time.” By Angela Woodall. Source.

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