Los Angeles’ social equity program was supposed to help historically disadvantaged communities get a jumpstart in the legal cannabis industry. But several years later, many participants say they feel 'betrayed'.
There are 240 cannabis business owners currently licensed through the program. They were promised grant funding, legal assistance, and technical help. Instead, they got high taxes, fees, and regulatory costs.
The state excise tax (19%) combined with the city sales tax (9.75%) and business tax (10%) brings the total tax burden for licensed cannabis businesses to 39.75%, according to District 6 Councilmember Imelda Padilla. Unlicensed shops are flourishing, as they're unburdened by the same levies and regulatory pressures. With little enforcement against the black market, it feels impossible for licensed businesses to compete.
Grants are meant to help, but those too have consistently failed to come through. Millions of dollars in grants aimed at helping cannabis entrepreneurs have been spent improperly or not at all, according to state audits. In an email to LAist, the city’s Department of Cannabis Regulation (DCR) said it had returned nearly $48,000 in unspent funds to the state. DCR estimates it could be forced to return up to $10 million.
Officials like Padilla, who chairs the city’s Government Operations Committee, have tried to get the city to lower its cannabis taxes. So far, that hasn’t happened.
Businesses say they have been denied a chance to have their concerns heard. During public comments at a meeting in May, one cannabis shop owner called the city's Cannabis Regulation Commission a "circus" and proceeded to shower the podium with confetti.
Some angry business owners have taken drastic measures. In April, Catalyst Cannabis Co. announced that it would be withholding tax money from the City of L.A. until it gets the services it was promised. Catalyst is not alone. According to Padilla, around 700 cannabis businesses had fallen behind on their taxes as of June.
Dilemmas exist for many licensed cannabis business owners in the city, but especially for those who placed their hopes in its social equity program. These businesses are largely run, not just by people of color, but by individuals who were targets of law enforcement prior to legalization. You can read more about the hardships they’ve experienced here.