Think about the tax revenue we could generate from the legalization of marijuana. That’s the spiel the cannabis advocacy community has been selling for decades to get a square nation to embrace greener times. But now that lawmakers are starting to listen to the cries — moving to legalize the leaf in their respective neck of the woods — the tax thing has sort of stuck in their craw. In Illinois, which just went legal at the beginning of the year, customers are seeing some of the highest tax rates in the nation on marijuana sales. It’s given them a bit of sticker shock, too. Some of them are even threatening to stay put in the underground market until the legal stuff is more affordable. But others have come up with a better plan to avoid paying the state’s high pot taxes. They are looking to get in on the state’s medical marijuana program. There’s a much lower tax there.
Somewhere around 2,600 people have applied for medical marijuana cards since the start of January, reports the Chicago Tribune. That might not sound like a lot, but it represents a 34% increase over what the state saw in the first two weeks of last December. This uptick, the report suggests, can be attributed to people wanting to take part in the legal cannabis system. Only many are averse to the ridiculously high tax rate in the recreational sector, so they are hoping to join the medicinal side instead. And why not? All of the cannabis products sold in both sectors are the same. And when the weed is labeled “medicine,” customers don’t have to wait in long lines.
In Illinois, the tax scheme on marijuana is like paying a vig to a sports bookie. The state taxes growers to the tune of 7% while imposing a series of excise taxes depending on the type of products. Customers must be prepared to shell out an extra 10% for bud, 20% for edibles and 25% on any pot products that contain 35% THC or more. Of course, there is also state and local sales tax on all purchases. In some cases, customers can expect to pay a 41% tax overall. It’s a situation that has turned many off the legal system and in the illicit market. After all, we’ve seen the underground only getting stronger in times of post-legalization.
But to participate in the state’s medical marijuana program, all a person has to do is get a doctor to sign off on a form that says they have one of some 50 health conditions. A lot of them are serious diseases, like Alzheimer’s and cancer. But recent tweaks in the law has opened the program up to those with pain issues, so virtually anyone can get in on the mix if they really want to. From there, a patient just has to cough up a $100 to $250 application fee, which entitles them to start buying medical marijuana immediately on the receipt while they wait for their card to arrive. And to top it off, all of those purchases are taxed at a rate of only 1%. It is making sense to a lot more people to go this route.
“We predicted that there would be a bump in patient load for cannabis certification but not the extent we are seeing,” Dr. Rahul Khare, who certifies patients for medical cannabis at Innovative Wellness, told the news source.
The trick at this point is not finding ways to sidestep the insanely high taxes on recreational marijuana, but it is finding a dispensary that has any pot to sell.
Since the initial phase of the market rollout only allows the state’s medical marijuana dispensaries to get in on the action, the supply that was there for the state’s 100,000 patients has all but dried up.
“It has been reported that many dispensaries are experiencing a shortage of cannabis products, including products for medical cannabis patients,” according to an email sent to dispensary owners by Cannabis Control Section in the Illinois Department of Financial and Professional Regulation.
“The Department takes seriously the availability of product for medical patients and dispensaries are required by law to prioritize providing products to medical cannabis patients,” it added.
Even with the state warning the cannabis industry to keep enough products on the shelves to service medical marijuana patients, the stock is still dwindling fast. Some of the latest figures show that people spent $11 million in Illinois on legal weed during the first week, which caused some operations to shut down temporarily. Of course, this weed shortage will start to work itself out eventually. But it could take a couple of years before there is enough legal product around to support both sectors.
The state could find itself in a position, however, of needing to reconsider its high tax rate if more people start getting medical marijuana cards. Just ask California how its tax plan is working out, and it is plain to see that cannabis customers will always find a way to avoid being taxed to death.