The legalization of recreational cannabis in the state of California has reportedly neither led to a downturn in illegal business nor has it relieved stress on law enforcement.
As it turns out, illegal cannabis growers have only thrived since California legalized the recreational use of the drug in 2016, stealing business from legal sellers at half the price due to the lack of regulation or taxation.
“The illegal industry is competing with the legal industry and essentially putting them out of business,” Sgt. James Roy of the Riverside County Sheriff’s Department told Fox News.
Roy, who heads the department’s cannabis eradication team, had recently raided an illegal farm in Riverside County that had four massive white tents, colloquially known as “hoop houses,” containing $1.5 million in illegal cannabis.
“This place is no different than thousands of others we hit this year confiscating about a half-million plants in Riverside County alone,” Roy told the outlet.
“It’s definitely profitable for the illegal market,” Roy later said. “They’re selling greenhouse marijuana by the pound of anywhere from $500 to $2,000 here on the West Coast. But if they take that same exact product and ship that back east, it’s going for two and three times that amount.”
A new report indicates that Washington, which legalized recreational marijuana in 2012, has been much more successful at displacing the black market than California, where voters approved legalization in 2016. In a 2021 survey by the International Cannabis Policy Study (ICPS), 77 percent of Washington cannabis consumers reported buying “any type of marijuana” from a “store, co-operative, or dispensary” in the previous year, while 17 percent said they had obtained pot from a “dealer.”
The share of Washington consumers who report buying marijuana from a “store, co-operative, or dispensary” is higher than the average for states that have legalized recreational use, which was 57 percent in 2021, according to a nationwide ICPS survey. Washington’s Liquor and Cannabis Board (LCB) paid for the ICPS report on cannabis consumption in that state, and the ICPS has not published California-specific survey data. But calculations based on estimated total consumption and legal sales suggest that the black market accounts for somewhere between two-thirds and three-quarters of marijuana purchased in California.
California’s striking failure to shift consumers from illegal to legal dealers is largely due to a combination of high taxes, onerous regulations, and local retailing bans. While Washington has a relatively high retail marijuana tax (37 percent, plus standard sales taxes), in other respects the state has made it easier for licensed suppliers to compete with illegal sources.
A 2022 study from Reason Foundation (which publishes Reason) notes that local restrictions in California have created “massive cannabis deserts” where “consumers have no access to a legal retailer within a reasonable distance of their home.” Washington has more than three times as many legal dispensaries per capita as California.
A new Biden administration effort to regulate cigarettes will bankroll street gangs and bankrupt U.S. tobacco farmers, experts say.
The Food and Drug Administration is preparing this month to require lower nicotine content in all cigarettes—a move critics argue will wreck the $75 billion U.S. tobacco industry amid a global economic crisis and boost a black market as crime spikes nationwide. The news comes weeks after the agency announced its plans to ban menthol cigarettes, which will cost federal and local governments an estimated $6.6 billion in the first year alone.
Richard Marianos, a 27-year veteran of the Bureau of Alcohol, Tobacco, Firearms, and Explosives, said these regulations will shift the demand for cigarettes toward unregulated tobacco grown internationally, which is then purchased and sold by drug dealers.
“The problem again with this administration is they do not take into consideration a totality of subject matter experts,” Marianos told the Washington Free Beacon. “I’ve never seen this much foolishness in my life.”
Marianos, who worked on gang violence at the ATF, said the black market for cigarettes is dominated by street gangs and would grow at least a hundredfold after the FDA implements its nicotine decision. He claims one of his former informants discovered some dealers make $5,000 selling cigarettes in a single afternoon. The FDA’s “uneducated and silly” cigarette plan, he said, would require law enforcement to focus on tobacco sales rather than drugs and violent crime.
The FDA’s cigarette regulations are a part of the Biden administration’s larger “harm reduction” strategy that enables illicit drug use while criminalizing tobacco. The Free Beacon reported in February that the Department of Health and Human Services was set to fund the distribution of crack pipes through a $30 million harm reduction program, which according to the New York Times sparked an “uproar” that “derailed” the agency’s entire drug policy.
Having utterly failed to end the marijuana black market in California, lawmakers have decided to backslide into the drug war by increasing fines on those who operate outside of the state’s very costly and tightly regulated legal cannabis system.
California will begin 2022 not just by increasing taxes on legal marijuana cultivation but also by introducing new fines against anybody “aiding and abetting” any unlicensed dealers in the state.
Lawmakers passed A.B. 1138 in September, and it was signed into law by Gov. Gavin Newsom in October to take effect at the start of 2022. California law establishing recreational marijuana already permits civil penalties against unlicensed marijuana dealers. A.B.1138 threatens civil fines of up to $30,000 per violation against anybody providing assistance to an unlicensed dealer. And each day of doing so counts as a new violation.
California’s implementation of recreational cannabis regulations, authorized by the passage of Proposition 64 in 2016, has been a massive mess. The ballot initiative allowed for municipalities to decide whether to allow cultivation and dispensaries, and two-thirds of them still refuse to do so despite the public vote. The state levies high cultivation and excise taxes that are escalated further by local sales taxes in any municipality that does allow for dispensaries to open up shop.
The result has been price and availability issues so severe that experts estimate that between two-thirds and three-quarters of all marijuana purchases take place through unlicensed dealers, which means that the state isn’t getting its share of the revenue. The problem is so severe that the editorial board at the Los Angeles Times recently acknowledged that high taxes for goods fuel black markets.
But instead of eliminating or reducing these taxes, the state is instead taking a more punitive approach. And it’s not just lawmakers looking to make sure the state is getting its cut of the money. The bill was introduced by Assemblywoman Blanca E. Rubio (D–Baldwin Park), but the Assembly analysis of her proposal explains that it was co-sponsored by the United Cannabis Business Association and The United Food and Commercial Western (UFCW) States Council, the union that represents some licensed cannabis industry workers. Several licensed cannabis industries and trade groups have also signed on in support.
At the beginning of 2022, tax rates for marijuana cultivated in California are set to increase, even though black market sales completely dominate the retail market in the Golden State.
Experts estimate that about three-quarters of all marijuana sales in California happen not through legal dispensaries, but through unlicensed vendors. California voters legalized the cultivation and sale of marijuana for recreational use in 2016, but extremely high taxes and oppressive regulations have caused the rollout to be a disaster.
The tax increase set to hit on New Year’s Day is a prime example. California taxes the cultivation of marijuana by weight. In the tax regulations that state lawmakers passed for cannabis in 2017, the cultivation tax rate was tied to inflation. When inflation rises, the cultivation tax will also automatically rise.
Inflation rose in 2021, and not by a small amount. The U.S. Bureau of Labor Statistics calculates that consumer prices rose nationally 6.8 percent between November 2020 and November 2021. Because of California’s law, cultivation taxes will rise 4.5 percent. For growers of fresh cannabis plants, the cultivation tax will jump from $1.35 an ounce to $1.41 an ounce. On top of the cultivation tax, the state charges a 15 percent excise tax, and the cities that allow dispensaries have their own local sales tax rates. A person attempting to legally buy marijuana in California can expect the price to balloon between 35–50 percent through tax add-ons, depending on the city.
This, obviously, will make it all the more difficult for legal vendors to compete with the black market. That the increase is happening anyway is absurd and should be seen as a warning against automatically tying any tax rate to inflation.
A Chicago pharmacist was arrested Tuesday for allegedly selling COVID-19 vaccination cards online.
Federal agents arrested pharmacist Tangtang Zhao on Tuesday, alleging he sold 125 authentic Centers for Disease Control and Prevention (CDC) vaccination cards on eBay, the Department of Justice (DOJ) announced. Zhao sold the cards to 11 different buyers for around $10 a card, according to the DOJ.
“Knowingly selling COVID vaccination cards to unvaccinated individuals puts millions of Americans at risk of serious injury or death,” FBI special agent Emmerson Buie Jr. said in the announcement. “To put such a small price on the safety of our nation is not only an insult to those who are doing their part in the fight to stop COVID-19, but a federal crime with serious consequences.”
Zhao was indicted on 12 counts of theft of government property. Zhao allegedly stole the cards from his workplace, a pharmacy which administered COVID-19 vaccines.
Zhao made his first appearance in court Tuesday, and faces up to 10 years in federal prison per count, according to the DOJ.
Senate Majority Leader Chuck Schumer (D-N.Y.) said that the federal government needs to crack down on the proliferation of fake COVID-19 vaccination cards in the midst of restrictions and rhetoric around vaccine passports.
The majority leader, in an announcement, called for “all-out enforcement” by the federal government.
“They are paying money for a fake card and risking prosecution,” said Schumer, holding up a picture of a falsified Centers for Disease Control and Prevention (CDC) card. “Who could be that dumb, who could be that dumb, the vaccine is free, the vaccine is safe, get the vaccine.”
Schumer said that the practice is illegal while saying that there needs to be a federal education campaign showing that it is against the law to sell or buy a fake card.
“Too many people,” he said, “are looking to buy them.”
Schumer is demanding U.S. Customs and Border Protection and the FBI team up with officials from the Department of Health and Human Services to launch a crackdown on the counterfeit cards and start a campaign to make clear that forging the cards could land people in federal prison.
He also wants the Justice Department to immediately prioritize cases involving fake vaccine cards and is pushing for Customs and Border Protection to work harder to find counterfeit cards being sent from overseas.
Over 3,000 fake COVID-19 vaccination cards from China have been seized in Memphis, Tennessee en route to other cities in the United States.
U.S. Customs and Border Protection (CBP) caught a shipment from Shenzhen, China to New Orleans, Louisiana, which contained 51 blank counterfeit vaccination cards, CBP said in a press release on Aug. 13. “It was the 15th such shipment of the night,” they said.
The FBI warned on March 30 that buying, selling, or using a counterfeit COVID-19 vaccination cards is a crime, and violators will face a fine and up to five years in prison.
The White House COVID-19 coordinator Jeff Zients also warned on Aug. 13 that it is “a crime” to falsify COVID-19 vaccination cards, amid new restrictions handed down by several major cities.
Federal officials this week warned that it is “a crime” to falsify COVID-19 vaccination cards amid new restrictions handed down by several major cities.
“We are aware of some cases of fraud or counterfeit COVID-19 cards being advertised on social media sites and e-commerce platforms, while the practice is not widespread,” White House COVID-19 coordinator Jeff Zients said during a COVID-19 White House virtual briefing.
Zients added that “it’s a crime,” and that the “Office of the Inspector General at the Department of Health and Human Services is investigating these schemes.”
Previously, the FBI and other federal agencies said anyone who is buying or selling fake vaccine cards could face penalties.
On Thursday, Zients said that the federal government is not planning to create a centralized database that holds individuals’ vaccination records.
“There will be no federal vaccination database. As with all other vaccines, the information gets held at the state and local level,” he said. “But any system that is developed in the private sector or elsewhere must meet key standards, including affordability, being available both digitally and on paper and importantly, protecting people’s privacy and security.”