State governments are bleeding the legalized marijuana industry dry with massive taxation and strangling it with red tape, killing the drugged golden goose.

(Video Credit: CNBC Television)

States are applying widely varying regulations to the marijuana industry making it difficult to comply amid skyrocketing growth and plummeting prices. According to analysts and industry groups, they are also taxing it to death. If any business can’t turn a profit, it’s not long for this world, and that includes selling pot.

“All of these issues are chipping away at the health of the industry to the point where I would describe the industry as in crisis in the United States,” Beau Whitney, who is the senior economist for the National Cannabis Industry Association, told the Daily Mail in an interview. “This is unsustainable from an economic perspective.”

Marijuana has now been legalized in 23 states. In 2022, state-regulated medical and recreational pot sales totaled more than $26 billion nationwide, according to Vangst, a cannabis jobs and professional network.

Dispensaries are having a harder and harder time eking out a profit due to a glut of marijuana production which is pushing prices continuously lower. Consumers love it in the short term, but in the long term, it could drive growers and retailers out of business.

Recreational weed industry ‘verges on collapse’ due to steep taxes, plunging prices, glut of competition- and thriving illicit pot market https://t.co/vAswI6R2A7

— NEWS MAKER (@NEWS_MAKER) August 28, 2023

A dispensary chain called MedMen in California, which was once branded the “Apple store of weed,” is now on the verge of bankruptcy due to California’s outrageous taxation and appetite for suffocating regulation.

In New Jersey, a cannabis trade group is ringing alarm bells, warning that the industry is stagnating and has entered a “doom loop” thanks to licensing delays according to the Daily Mail.

“Sadly, the legal cannabis markets demanded by countless Americans are on the verge of collapse if common sense, practical reforms are not enacted urgently,” the National Cannabis Industry Association (NCIA) stated in a report issued in July.

If excess pot is produced in the marijuana trade, it is essentially trapped in the state it was grown in and cannot be sold over state lines due to the fractured nature of the industry Whitney pointed out. It has led to what is known as a “ganga glut” on the West Coast, sending prices spiraling downward.

“Unlimited licenses ensure opportunities for smaller and social equity applicants, yet this approach leads to a propensity for oversaturation of supply, resulting in lower prices, tighter margins, and economic stress for operators across the supply chain,” Whitney wrote.

Who could have known that heavily regulated and taxed legalization was a bad idea?

— donicc (@donicc) August 28, 2023

Washington and Colorado were the first states to legalize pot in 2012.

Only 24 percent of cannabis companies are profitable nationwide. That’s down from 42 percent in 2022 according to a Whitney Economics survey.

The survey company told the Daily Mail in an interview that “in addition to pricing pressures, cannabis businesses are struggling under tax burdens, because federal law prohibits them from deducting business expenses from income taxes like a normal business would.”

That has resulted in marijuana companies paying an effective federal tax rate of up to 70 percent. That’s on top of state and local excise taxes.

Michigan is drowning in cannabis licenses swamping the state with so much competition that a profit can’t be turned according to Bridge Michigan. Add to that the state imposing a 10 percent excise tax in addition to a 6 percent sales tax and you can see why dispensaries are going under. That is also happening in other states.

This is a good example of how taxes and governmental regulation destroyed business opportunities.

— James DePorre (@RevShark) August 28, 2023

Massachusetts is floundering due to low pricing and a flood of competition as well.

“It’s actually very, very scary,” Kobie Evans, who opened Pure Oasis dispensary in Dorchester in 2020, and a second location in Boston this summer, told the Boston Globe. “When everyone was speculating about the industry, back in 2016, ’17, ’18, we all had these high hopes and all these grand expectations.”

“The reality is setting in that there isn’t this pot of gold at the end of the rainbow,” he ironically commented.

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