Marijuana retailers in Washington near the Oregon border have seen a steep decline in sales since medical marijuana dispensaries in Oregon began selling recreational cannabis. Several factors contribute to this, but the bottom line is: you can’t repeal the laws of economics.
Cannabis consumers along the border with Washington and Oregon are buying their recreational marijuana in Oregon because it is cheaper. A full dollar cheaper per gram on average, according to Leafly.
Why? Well, for one, taxes are much higher on recreational marijuana in Washington, a whopping 37% compared to 25% (soon to below 20%) in Oregon. On top of that, in the first three months of recreational sales in Oregon there were no taxes on it at all.
The result? Sales drops in Washington near the border approaching 50% or more. After all, if you can get cannabis on the black market or across the state border for less, why wouldn’t you?
When recreational shops begin opening in Oregon later this year, things are likely to get worse for Washington retailers. Declining sales mean declining tax revenue; a good reason for authorities in Washington to look into lowering that 37% tax rate.
The market will not be denied. All other things being equal, people will invariably buy more of something at a lower price. This is what is wrong with taxes on cannabis; if they are too high, people won’t buy. They don’t have to; they probably know someone who grows and/or sells and they can get a much better deal. Or if cheaper legal weed is right across the state border, they might make a little trip.
Taxes are inevitable when it comes to legalization, but they don’t have to be prohibitively high. And if they are, say goodbye to your tax revenue.