Oakland Mayor Schaaf opposes tax break for large cannabis businesses

Harborside marijuana dispensary in Oakland.

OAKLAND, Calif. - Oakland Mayor Libby Schaaf says she opposes a proposed tax break for the city's largest cannabis businesses that the City Council will consider at its meeting on Tuesday evening.

The Council voted unanimously to approve the tax break at the first reading of the proposal at a meeting last month and will have a second reading on the matter at its meeting in City Hall chambers at 1 Frank Ogawa Plaza at 5:30 p.m. Tuesday.

Oakland's 10 percent tax on all non-medical cannabis business gross receipts is among the highest such tax rates in the state that's being imposed by local jurisdictions.

In a message to Oakland residents, Schaaf said, "Our City Council is poised to give a massive $4 million a year tax-break to Oakland's largest cannabis businesses. I urge you to call your councilmembers to oppose this reckless give-away."

Schaaf said the City Council already voted last spring to reduce taxes for the smallest 150 of the 195 registered cannabis businesses in Oakland.

She wrote, "Tuesday's proposed action will benefit the largest businesses -- with most of it going to a handful of businesses that gross more than $1.5 million a year!"

Schaaf said that if the Council does vote to approve what she called "this irresponsible tax-break," residents should insist that council members be "transparent and responsible by specifying the services they will cut to pay for it."

She said that's because by law the council must maintain a balanced budget.

"Oakland can't afford to be giving out tax breaks if we're serious about addressing homelessness and housing," Schaaf told KTVU. 

City Councilman Dan Kalb, who is proposing the tax break along with Councilwoman Sheng Thao, said the council is sensitive to Schaaf's concern about not impacting the city's budget, so the proposal calls for phasing in the break gradually over three years, not all at once.

In fact, Kalb said that in the first year the break for the largest cannabis businesses will be "very modest" and only drop by 0.5 percent, from 10 percent to 9.5 percent.

Kalb said now that marijuana is legal in California, the idea is to harmonize the tax rates for both medical and non-medical cannabis.

He said non-medical cannabis is only taxed at a 5% rate in Oakland now and his proposal calls for reducing the tax on non-medical cannabis to 5 percent over three years.

Kalb said, "We want to be competitive with other cities" because most other cities in the Bay Area and the state have tax rates much less than 10 percent and some Oakland-based businesses have closed down or moved elsewhere.

"I think it will make us much more competitive," said Joshua Chase, owner of the Have A Heart Oakland dispensary on Broadway, who believes that customers will go elsewhere, such as Berkeley, where taxes are already lower. "Cannabis is still a commodity. It is very price sensitive to the consumer and when the consumer finds a sale or something, that's a little cheaper, they usually tend to gavitate towards that area," Chase said. 

Chase said that illegal sales still make up for 80% of the marijuana market. 

The Oakland Police Officers Association sent a letter to Oakland City Council, condemning the tax cuts, on behalf of its members and other city employees.

"They have sacrificed many things during our various contract negotiations as far as salary and benefits," said Schaaf.

Some cannabis businesses said leaving Oakland is an option.

"I do not believe that these large cannabis businesses will leave Oakland," said Schaaf.

Tax-cut advocates said Oakland will be taking a risk if cuts are not forthcoming. 

"If we can't collect the tax, we cannot also give it to the city," Chase said. 

KTVU's Tom Vacar contributed to this report.