Supervisors Approve Marijuana Tax Rates

Over the objections of small-scale marijuana farmers, Humboldt County’s Board of Supervisors has approved an excise tax rate for a ballot measure that’s headed for a vote in the November election.
The marijuana excise tax’s ballot measure statement and an ordinance setting tax rates based on grow types were approved by supervisors at their July 19 meeting. Supervisors will vote on approving placement of the measure on the November election ballot on Aug. 9.
The approved tax rates will charge $1 per square foot of cultivation area for outdoor grows, $2 per square foot for mixed light grows and $3 per square foot for indoor grows. If the ballot measure is approved by voters, the taxes are expected to draw $7.3 million a year in revenue for “essential services” such as enforcement of environmental laws, mental health and child abuse services, and clean-ups in the wake of illegal marijuana operations.
The rates were originally much higher and set up under a tiered system whose revenues were estimated at almost double the amount than what supervisors approved. But during a public comment session, small-scale marijuana farmers implored supervisors to drive the rates down further, saying taxes will inhibit compliance with new laws and tilt the market toward large-scale, profit-driven growing.
Sunshine Johnston of the Southern Humboldt Community Alliance told supervisors that those with small farms won’t be able to absorb the financial impact of the proposed taxes. She said taxes should be focused on the retail market, which can recover costs by passing them onto customers.
“This is going to be especially difficult for the smallest of the small farmers,” she added.
Danielle Burkhart, a compliance planning and management consultant, said the excise tax proposal contradicts Humboldt’s local values by making compliance less likely and discouraging the survival of small-scale farms.
“To encourage the growth of big farms in this way is further causing our small farms to head for extinction — without that diversity of the market, you can kiss Humboldt County as we know it goodbye,” she continued.
Other speakers said the proposed tax should be based on sales and amounts produced rather than square footage. Some warned that a variety of new taxes and fees will drive up the cost of doing business, giving illegal growers an unfair advantage.
In all, 19 people spoke against the proposed tax rate. Only two people supported it — John Bartholemew, the county’s tax collector, and Alex Moore, owner of Honeydew Farms LLC, who was recently given permit approvals for a six-acre marijuana farm.
But Supervisor Estelle Fennell said that other counties are pursuing much higher tax rates and the proposed rates are scaled down for outdoor growers. She added that for-profit grows and the market advantages they may gain are outcomes of a new legal environment.
“It’s really difficult, I know, for people to come into this but this is the reality — this is the new normal, it is now legal to cultivate marijuana for profit,” Fennell said.
Board Chair Mark Lovelace pointed out that a local poll showed strong support for rates of up to $12 per square foot.
Supervisor Rex Bohn said that he “literally got my ass handed to me” for lowering the rates from the original tiered system. Dairy farmers in his district were the ones he heard from, he continued.
Bohn told the growers in the audience that they’ll have to adapt to the same regulatory circumstances that agriculturalists like dairy farmers have been dealing with for decades.
“If you think you’re going to pay more, I’ll tell you, go down to Ferndale and talk to those dairy farmers,” he said.
He also noted that the advantage of not having to account for the risk of being raided and busted. “I had somebody tell me the other day, ‘The cost of peace of mind is hard to put a price on,’” Bohn said.
Supervisors unanimously approved the ballot measure statement and the tax rate ordinance. Since a tax measure’s rates can be lowered after being approved without another election vote, supervisors said they’ll consider dropping or lowering the taxes for farms of 2,000 square feet or less.