SAN DIEGO —
Council approves reduction from 8 percent to 2 percent despite IBA estimate of up to $4M in lost revenue
The San Diego City Council on Tuesday approved a reduction to some city cannabis taxes to encourage the opening of more indoor cannabis farms and factories that make cannabis edibles.
The council voted 6-3 to shrink the tax rate on production facilities from 8 percent to 2 percent. San Diego’s two dozen dispensaries will continue to pay the 8 percent rate.
Supporters said San Diego’s tax rate on cannabis production facilities, which is among the highest in the state, is discouraging those businesses from opening in the city.
Only 19 of 40 city-approved production facilities have opened, creating a gap in the local supply chain that forces some local dispensaries to truck their cannabis into San Diego from elsewhere.
Supporters said other drawbacks of having fewer production facilities include fewer local cannabis jobs and greater opportunities for the local cannabis black market to thrive.
“We owe it to our local business owners and those operating legal businesses to have the chance to compete right here in the city,” Councilmember Raul Campillo said.
Critics of lowering the cannabis taxes said San Diego’s overall tax revenues, which have been affected more by the pandemic because the city relies so much on tourism, can’t afford to be reduced in any way.
They also complained San Diego lacks a cannabis equity program to help low-income people and minorities gain access to the lucrative industry that has relatively high upfront costs.
“I’m having a major, major issue with reducing the tax rate for an industry that we have not opened up to everyone,” Councilmember Monica Montgomery Steppe said.
City officials said San Diego’s cannabis equity program is scheduled to be ready for operation sometime this year.
