Oakland City Council shrugged off opposition from Mayor Libby Schaaf to unanimously approve a tax break for the city’s largest cannabis businesses this week.
The council voted in favour of the tax reduction at its first reading in November, and the final approval was set for this week. Schaaf announced that she opposed this “reckless giveaway”, arguing that it would simply line the pockets of a handful of businesses that already gross more than $1.5 billion a year.
She said the city is under-resourced to solve challenges around homelessness right now and claimed there was no justification for the “massive tax break”. She urged residents to contact their councilmembers and ask them to vote no.
However, her words fells on deaf ears. The council once again voted unanimously to approve the measure at a meeting this week, meaning the tax rate will drop from 10% to 9.5% in the first year.
City Councilman Dan Kalb, who proposed the tax reduction, said it does not amount to a massive tax break for big businesses. The city council already voted to give the smallest 150 of the 195 registered cannabis businesses in Oakland a tax break last spring, and it is now bringing the others in line.
Kalb said the reduction is necessary because the city already imposes one of the highest recreational marijuana tax rates in California. He claimed residents would simply leave the city to buy cannabis in neighbouring Emeryville, Berkeley, San Francisco, Santa Rosa and Richmond – which all have lower tax rates – if it did not take steps to ensure it is competitive.
“If we want to make sure our cannabis businesses thrive so we can realize the jobs and tax revenue that come with a thriving cannabis industry, then we must be competitive with other jurisdictions,” said Kalb.
He added that the council is “sensitive” to Schaaf’s concerns, which is why it decided to phase the tax break in over the next three years. It believes this will not cause a significant impact upon the city’s budget.
It could ultimately mean greater revenue for the city, as it may encourage higher sales and help legal businesses seize market share from the black market that is currently thriving in the Golden State. Kalb also pointed out that the cannabis businesses will still pay a far higher tax rate than any other businesses in Oakland, despite the reduction.