Is proposed SLO County cannabis tax too high or just right? Here's what the two sides say

The question of whether a proposed San Luis Obispo County cannabis business tax is fair or if it will push people to buy their weed on the black market will be put before voters June 5.

The county is proposing a 4 percent general county tax (Measure B-18) through 2020, giving the Board of Supervisors the flexibility to increase the rate by 2 percent each year up to 10 percent.

The tax is envisioned to only pay for the cost of administering the local cannabis industry, not to bring additional revenue for other needs, such as road improvements or law enforcement demands.

"Whether you agree with the legalization of cannabis or not, it is imperative that we tax the industry to ensure compliance with existing laws and deal with the black market," wrote supervisors Adam Hill and John Peschong in their argument in favor of the tax.

City and county governments statewide have wrestled with creating the appropriate local tax for the cannabis industry. A common theme is trying to find the middle ground between covering costs to regulate, while not pushing consumers to buy pot on the black market.

The board believes the cannabis industry will create needs for county services including code enforcement, law enforcement, policy development, public health and education and environmental clean-up.

However, some believe the tax would price out the consumer if it's allowed to grow to 10 percent.

"As a new industry, if we want to be taken seriously, we need to pay a tax," said Jason Kallen, executive director of San Luis Obispo NORML, a cannabis advocacy group. "At 4 percentage, I don’t think it’s too high. But at 10 percent, I definitely think it’s too high. I think between 2 to 3 percent is optimum."

A flower grows on a marijuana plant at Megan's Organic Market's marijuana farm in Los Osos. The city of San Luis Obispo passed its draft cannabis laws on Tuesday. Joe Johnston jjohnston@thetribunenews.com

Local cannabis business owner Megan Souza of Megan's Organic Market also has said she thinks that a 10 percent tax would force consumers into the black market.

A consultant for County Tax Collector Jim Erb estimated that revenue could range from $1.4 million to $28 million. If approved by a majority vote, the so-called "Erb tax" could take effect July 1.

The tax would not apply to testing facilities, and the board would have discretion to tax various business types at different rates.

Nipomo resident Art Herbon said the county's approach is "a really responsible way to go."

"We know the cannabis process is going to be expensive to administer," Herbon said at a March 6 Board of Supervisors meeting. "We don't know how much. I think 4 percent tax is a good starting point, and I like the flexibility. Going down the road, you can adjust this on an annual basis."

Any local tax would be in addition to state taxes, which include a cultivation dry weight tax of $9.25 for every ounce of cannabis flower and $2.75 for every ounce of cannabis leaf and a 15 percent excise tax.