[Opinion] Modernize Cannabis Taxes in Long Beach for the Benefit of All City Residents

Note: This opinion was first published on October 30, 2019 by Joe Rogoway on LinkedIn.

Long Beach is a special place for me. I was born there and went to pre-school, kindergarten, and summer camp at the JCC in Signal Hill. My mother is a retired Long Beach Unified school teacher and my Uncle Ned was a City Planner who helped plan Naples, the Alamitos Bay Marina, El Dorado Park, and the on-ramps and off-ramps on the 405 that go through Long Beach. My roots are deep in the LBC and I very much want to see the City reach its true potential.

I am also a firm believer that cannabis is a force for good and that the City of Long Beach’s embrace of the cannabis industry has the potential to further Long Beach’s renaissance that we have witnessed in recent years. Right now though, Long Beach is underperforming in how the City uses cannabis policy as a mechanism for economic development. This can be seen in a variety of ways such as the City’s curtailment of on-site consumption at cannabis retail facilities and the City’s prohibitions on locating those facilities within 1,000 ft of the beach. Both of these policies negatively impact tourism and other core benefits of cannabis legalization such as social use.

The issue of primary concern now before the Long Beach City Council is the modernization of cannabis supply chain taxes to bring them into market alignment. The existing 6% Gross Receipts tax was enacted at a time when elected officials assumed that cannabis industry operators could both easily pay those amounts and would be eager to do so for the privilege of doing business in Long Beach.  Neither of these assumptions proved to be true.

The commercial cannabis marketplace is exceedingly competitive. Most cannabis industry operators have razor thin margins or are not yet profitable. Other neighboring jurisdictions have much lower tax rates which greatly incentivizes businesses to domicile in those lower-taxed municipalities. The City of Los Angeles, for example, has a 1% tax on similar businesses. 

In the aggregate, the difference between a 1% and 6% tax on gross receipts is a significant amount of money for the business operator which could make the difference between profitability and out-of-business. As a result, businesses operating in the cannabis industry must pay keen attention to where they domicile their operations since that decision can have an existential impact on those businesses.

The City of Long Beach should understand this and modernize its cannabis taxes in order to better align with current market realities. This means that Long Beach, like the City of Los Angeles, should also adopt a 1% tax on cannabis supply chain businesses such as distributors and manufacturers. Doing so will incentivize businesses to come and stay in Long Beach.

Adopting a 1% tax on cannabis supply chain businesses not only benefits the City through growing the number of tax paying cannabis businesses, and thereby making the pie bigger for revenue generation. Modernizing the supply chain tax to 1% also contributes to the wider scope of economic development sought by City leaders. Jobs in the cannabis industry are typically well paid and often unionized. Local residents who are employed by cannabis industry businesses then, in turn, reinvest their earnings back into the community through their respective spending habits. This creates a virtuous cycle for the community at large. 

Ideally, the legalization of cannabis should benefit everyone in the community, especially those who are not participants in the cannabis industry. This happens through the revenue generation and economic development, which comes from prudent regulation that is developed through insightful cannabis policy. The Long Beach City Council has a unique and important opportunity to benefit its constituents by modernizing the tax rate to 1%. I support this effort and I hope you do as well.

Please contact your elected Long Beach representative through the information shown below and voice your support for a 1% tax on cannabis manufacturers and distributors:

Please also support Long Beach Collective Association (https://thelbca.com/) in their efforts to modernize Long Beach’s treatment of the cannabis industry.