Senate Bill 1506 would allow local governments to increase their cannabis sales tax rate from 3% to 10%, on top of the state cannabis sales tax of 17%, resulting in an increase on the sales tax paid by non-OMMP cardholders from 20% to 27%. This tax increase will impact low-income Oregonians the hardest, destroy small businesses, disproportionately impact women and minority owned businesses, and drive businesses and consumers to the illicit market. The bill is set for a committee vote next week, so there is still time to stop this legislation. The cannabis industry, consumers, and medical patients need to tell legislators that this bill is bad public policy:
Tell Legislators on Social Media that You Oppose SB 1506:
Post your opinion to your Facebook wall and tag: @OregonSenateDemocrats @OregonHouseDemocrats
or Tweet and tag: @ORSenDemocrats @oregonhousedems
Use hashtags: #ORpol, #ORleg, #cannabisindustry, #CannabisCommunity, #cannabis
Why SB 1506 is Bad Policy
Disproportionate Impact on Small Businesses
Small and craft cannabis businesses are already struggling. Analysis from economist Beau Whitney shows that 58% of cannabis operators are not making profit. The situation is worse for women and minority owned businesses, as 63% of women owned businesses and 68% of minority owned businesses are not making a profit.
Taxes are one of the top concerns for the industry, and the regressive and inequitable nature of SB 1506 will only compound the problem. A 7% local sales tax increase will eviscerate already struggling businesses and inhibit equity by disparately impacting women and minority owned businesses.
SB 1506 Will Destroy Wealth of Cannabis Business Owners by Depressing Consumer Demand
Continued federal prohibition means cannabis businesses cannot file for bankruptcy protection. The economic fallout of SB 1506, should it pass, will depress consumer demand for adult-use marijuana from the state’s dispensaries, which will in turn result in failed business owners losing their investment and may result in personal liability for their company’s outstanding financial labilities. SB 1506 will directly strip wealth from small business owners and their families.
Driving Cannabis Underground
If SB 1506 passes, cannabis businesses and consumers will flock to the illicit market where the cost of doing business and purchasing products is much lower. Oregon currently has relatively low barriers to market access, compared to states like California where the cannabis tax rate is much higher. Lower taxes are why over 80% of cannabis businesses in Oregon participate in the legal market, whereas only 42% of cannabis businesses in California participate in the legal market.
Increasing marijuana taxes will only fuel illicit grows and cartel activity. The legislature is currently working on multiple bills to inhibit illegal marijuana production, and SB 1506 is completely counterintuitive to those efforts.
The Tax Hike is Regressive
A 2019 consumer report found that 76% of Oregon cannabis consumers are currently satisfied with the price of cannabis. SB 1506 will directly raise retail prices, and the economic impact will be felt hardest by low-income Oregonians.
Of the 900 respondents in the 2019 report, 24% made less than $25k per year, with 26% of those low-income individuals reporting to have spent more than $500 on cannabis the prior year. 71% of these consumers identified price as their overwhelming purchase factor. Increased prices will force low-income consumers to illicit growers, and outside the regulated market where products are tested and safe.
Oregon currently has the highest rate of regular cannabis users (52%, compared to 44% in Washington and 46% in Colorado). These consumers bring major economic value to the state. If they are forced back to the illicit market, the state will lose out on the economic and tax revenue benefits of legalization, and the public safety threats posed by the illicit market will only be exacerbated.