San Francisco voters may decide next year whether to impose a local tax on the sale of cannabis under a plan announced by Mayor Ed Lee on Tuesday.
To hash out the details of the tax proposal, including the rate, the mayor will create a Cannabis Tax Task Force.
“We are planning to do so in a way that’s thoughtful and considerate of our local cannabis market,” the mayor said. “While many of the details of this tax are yet to be developed, chief among the goals must be to ensure that marginalized communities benefit from the revenue.”
The task force will include the city administrator, tax collector, city controller and supervisors Jeff Sheehy and Malia Cohen.
The tax proposal is among numerous local regulations San Francisco is considering for the new era of the sale of recreational marijuana after voters approved Proposition 64 last year, which legalized the adult use of the drug beginning January 2018.
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Under Prop. 64, a statewide 15 percent excise tax is assessed on marijuana purchases and a tax on cultivators at rates of $9.25 per ounce of marijuana flowers and $2.75 per ounce of marijuana leaves. The tax could mean up to $1 billion in tax revenue for the state annually after the initial years of permitting, according to the state’s Legislative Analyst Office. A local tax “could easily amount to tens of millions of dollars annually.”
Terrance Alan is chair of The City’s two-year-old Cannabis State Legalization Task Force, which last year recommended no more than a 1 percent local tax. “We debated various percentages,” Alan recalled Tuesday.
The concern around taxing is creating a “tipping point” in costs that would lead to a “black market economy,” Alan said.
He cautioned The City not to view cannabis as a golden goose. “Cannabis can’t solve our budget problems,” Alan said.
Laura Thomas, deputy state director for the Drug Policy Alliance, said any tax proposal “needs to be considered in light of other goals, such as ensuring that we aren’t inadvertently supporting the continuation of a cheaper illicit market.”
Thomas added, “We need to prioritize making the new legal economy accessible to those who have been working in the illicit economy, both as entrepreneurs and as workers, and I’m concerned that a tax rate or fees that are set too high may be a barrier to participating.”
Much like Prop. 64 earmarks tax revenues for certain programs, the mayor wants the local tax to do the same. That could mean using the tax revenue “to create jobs and entrepreneurship opportunities in the industry” as well as “investing in health and social welfare programs, job training initiatives and other efforts that help our communities.”
Also on the pot front, the mayor last week introduced legislation to create a $700,000 Office of Cannabis, which would handle the permitting of operators to sell and grow the drug. The new office would include a citizens advisory committee.
The City plans to propose regulations to address such things as where the pot-selling businesses can locate and how people can grow marijuana by Sept. 1.