Commentary: Marijuana legalization will create tax headache in California

One of the biggest pitfalls of Proposition 19, the ballot measure to legalize the recreational use of marijuana in California, is that it does not set statewide standards on taxation and regulation, but gives local governments far too much leeway.

So some cities see a golden opportunity to replenish their coffers, and are going to voters on Nov. 2 with tax measures.

But a hodgepodge of taxes on marijuana is not the right way to find new revenue — and proposals to tax marijuana used for medical purposes are even more objectionable.

In Sacramento, Measure C — if voters approve Proposition 19 and the city allows recreational marijuana shops to open — would let the city tax the businesses at up to 10 percent of gross revenue starting next July 1. (The city plans to start at 5 percent, but wants the flexibility to raise the rate without going back to voters for permission.)

Whether Proposition 19 passes or not, Measure C would also authorize the city to tax medical marijuana dispensaries starting next July at up to 4 percent of gross sales, though the city initially plans a 2 percent rate. The tax is expected to raise $300,000 to $500,000 a year for the general fund. Now, dispensaries are taxed like any other business, $30 to $5,000 a year, based on sales.

On a parallel track, the city is working on regulations for the dispensaries, including limiting their size and keeping them away from parks, schools, day care centers and churches.

Marijuana purveyors — not city taxpayers — should foot the bill for adequate oversight, including code enforcement and police patrols. But those costs will, or can, be covered by permit fees. The tax is meant to generate revenue for a city seeking to shore up its finances after three years of budget cuts.

To read the complete editorial, visit www.sacbee.com.