A potential ballot measure that would create a special cannabis sales taxes and fees to support a neighborhood health fund, with the goal of revitalizing communities damaged by the war on drugs, was tentatively approved by the Los Angeles City Council Tuesday.
The “Cannabis Reinvestment Act,” which would go before city voters in the Nov. 6 general election, would impose a 1 percent gross receipts tax on all commercial activity, a $5 surcharge for tickets sold for temporary cannabis events and a $5 surcharge for any test of cannabis products conducted by a licensed commercial cannabis testing laboratory.
The ballot measure would also include a provision that when the cannabis industry within the city of Los Angeles reaches an aggregate of $1.5 billion in annual total gross receipts between Jan. 1 and Dec. 31 of any given year, the special taxation for cannabis would increase to 2 percent.
The resulting health fund would be used to support youth leadership and civic engagement, after-school programs and educational opportunities, as well as improved local health services in minority communities “as they recover from pernicious drug laws,” according to a motion introduced by Councilman Marqueece Harris-Dawson.
The council approved the ballot measure on an 11-0 vote, but a unanimous vote of at least 12 members is needed for an ordinance to pass on first reading. A second vote will be taken after the council returns from a two-week-plus summer recess.
Marijuana has been legal for recreational sales and use in California since Jan. 1, and the Los Angeles City Council drafted a series of rules and regulations last year in preparation for the new industry.
Harris-Dawson, who represents many Latino and black neighborhoods in South Los Angeles, outlined his support for the health fund in a letter to the Rules, Elections and Intergovernmental Relations Committee before it initially considered a vote on the fund in May.
“Even as we stand on this precipice, we must recognize that we stand squarely in the shadow of the unjust war on drugs. This atrocity targeted Angelenos of color, decimated neighborhoods, ripped families apart and criminalized the illness of addiction,” Harris-Dawson wrote. “Today, we have an opportunity to build new systems and shape an industry in ways that recognizes wrongs, respect all residents, and intentionally builds a more equitable society.”
Citing several Drug Policy Alliance studies, Harris-Dawson said 80 percent of people federally incarcerated for drug offenses are black or Latino, and that black Angelenos are arrested for marijuana possession at seven times the rate of whites.
Some representatives of the cannabis industry spoke out against the tax to the council’s Rules, Elections and Intergovernmental Relations Committee earlier this month.
“This ballot proposition is a fool’s errand wrapped in a clown’s bow,” said Adam Vine, a co-founder Cage-Free Cannabis, an organization that says it is dedicated to helping the cannabis industry and consumers repair harms caused by the war on drugs.
“We need you to fund this equity program from the general fund and we need it yesterday. We need solutions that address the scope of the problem from South L.A. to the Valley to Boyle Heights and beyond,” Vine said. “If you want solutions we have plenty of innovative problem solvers right here in this room, but a 1 percent tax carved up by council districts is not a solution for equity, justice and repair in this industry.”
About $40.2 million in gross receipts tax revenue from cannabis activity is assumed in the 2018-19 city budget, and a city report says approval for a special cannabis tax of 1 percent is projected to generate around $4.37 million annually.
In order to ease the impact that the new tax would have on the industry, the Rules, Elections and Intergovernmental Relations Committee also approved a separate motion that would include a 2 percent reduction to the medical cannabis and recreational cannabis rates, to be restored in 0.5 percent increments over four years; a 0.75 percent reduction to the distribution and testing laboratory rate to be restored in 0.25 percent increments over three years; and a 1.5 percent reduction to the cultivation and manufacturing rate to be restored in 0.5 percent increments over three years.
The lower tax would be implemented on Jan. 1, 2020, and the reduction will be completely phased out by Jan. 1, 2024.