States Reform Act would help California’s struggling legal marijuana market
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States Reform Act would help California’s struggling legal marijuana market

Proposed federal legalization legislation would allow California’s legal cannabis businesses to compete in an interstate marketplace.

California was one of the first states to legalize marijuana but thanks to high taxes and over-regulation the state has failed to realize many of the benefits of a successful cannabis market. There are still over 3,000 black market dispensaries operating in California, almost four times the number of legal ones, and black-market sales of marijuana are estimated to be three times higher than legal marijuana products. As a result, tax revenues from marijuana sales are only around one-third of California’s initial expectations.

Ultimately, those problems require state lawmakers and local governments to open up business licensing to more entrepreneurs and reduce taxes on cannabis. But a new bill in Congress that would legalize marijuana at the federal level, the States Reform Act, could have a big impact on California‘s legal marijuana industry.

The legislation, led by Rep. Nancy Mace (R-SC) and five Republican co-sponsors, including Rep. Tom McClintock (R-CA), would allow California’s legal cannabis businesses to compete in an interstate marketplace (in which California is known for high-quality products). The bill would tax and regulate marijuana while doing away with barriers that prevent California’s marijuana businesses from accessing financial services, Small Business Administration loans, and other federal business assistance programs.

While majorities of Democrats and liberals have long supported legalizing marijuana, support has also grown among conservatives and Republicans in recent years. Extensive evidence now shows that legal marijuana markets have contributed to a decrease in violent crime and a rise in property values, while not contributing to an increase in marijuana use amongst young people.  Legal and regulated marijuana markets are making everyone safer and creating economic opportunities.

Rep. Mace’s proposed States Reform Act would legalize all state-run medical and adult-use marijuana programs under federal law. It would not force all states to legalize marijuana, but it would facilitate an interstate marketplace among states where marijuana is legal. The Treasury Department and the Bureau of Alcohol Tobacco and Firearms would become the lead federal agencies dealing with marijuana and would enforce such requirements as tracking marijuana products from seed to sale.

The bill would also avoid some mistakes made by California regulators by avoiding over-taxing and over-regulating the market.  The States Reform Act establishes a 3% federal excise tax on sales and does not look to limit the number of sellers or restrict how marijuana businesses are organized. The goal is to replace the black market with safe and legal products and sales.

Just as important, the bill would help start to restore justice by expunging criminal records for those serving sentences or with criminal records for non-violent federal cannabis crimes. This would remove barriers that wrongly prevent people who committed non-violent drug offenses from enrolling in college, securing business loans, or even applying for some jobs.

Existing federal regulation has made it difficult for legal marijuana businesses to acquire bank accounts and business insurance.  The federal tax code also restricts cannabis businesses from claiming the most common business deductions on their federal income tax returns. And some workers in the legal marijuana industry have been denied home loans, student loans, and bank accounts because their income is derived from marijuana.

For businesses and workers in California’s marijuana market, the bill would create more opportunities. It would also remove the real and constant fear that federal prosecutors could, at any moment, decide to enforce federal law and arrest and seize the assets of anyone involved in legal, state-licensed marijuana businesses.

It’s nice to see a few Republicans like Reps. Mace and McClintock join the dozens of California Democrats in Congress who have been calling for the federal legalization of marijuana and important criminal justice reforms. There should be bipartisan agreement that marijuana legalization is long overdue.

A version of this column previously appeared in the Orange County Register.