Marijuana tax cut, health cost controls falter in Legislature

SACRAMENTO - Measures to cut the marijuana tax and create government price controls in California on health care have failed to make it through the committee stage in the state Legislature.

Here's a look at the situation:

Marijuana tax

Legislation that would have slashed taxes on legal pot for three years to entice people away from the black market failed to advance out of a key legislative committee Friday.

"Today was another big win for the black market," said Assemblyman Tom Lackey, who co-authored the measure. "All we wanted to do is to level the playing field financially."

Marijuana growers and sellers in California, which launched the nation's largest marijuana market at the start of the year, have complained that taxes are too high. They argue many consumers are shopping in the underground market to save money.

More marijuana coverage:

Simi Valley and Thousand Oaks consider pot business tax ballot measures

Fillmore puts commercial cultivation of pot on November ballot

Brewery told to stop making beer with hemp-derived extract

In some areas, combined state and local taxes can approach 50 percent.

Earlier this month, state cultivation and excise taxes fell far below projections for the first three months of the year. The state had expected to take in $175 million by the end of June, but just $34 million came in between January and March, startling state officials.

Lackey, a Los Angeles-area Republican, said opponents of his Assembly measure argued it was too soon to slash taxes without further evidence they were driving people to the black market.

California imposes a 15 percent excise tax on pot and separate taxes on cultivation, along with regular sales taxes. There are also new costs for testing and distribution, which could be rolled into the price. Local governments can add taxes, too.

Lackey's measure, AB3157, would have lowered the state excise tax to 11 percent and suspended cultivation taxes for three years. He hopes the effort will be revived this year despite failing to advance out of the Assembly Appropriations Committee.

Earlier this week, Monterey County slashed its marijuana tax rate because of complaints from growers. An attorney for the growers said the decision will help a struggling industry take root in the farming region about 120 miles (193 kilometers) south of San Francisco.

The rollout of the broad legal market has been bumpy. There are complaints that too few licenses have been issued, especially for retailers, and large stretches of the state have either banned commercial activity or lagged in establishing local regulations.

Health care costs

A proposal to create government price controls in California for surgeries, hospital stays, doctor visits and other health care services died Friday when it failed to clear a key committee, but the author says he plans to bring it back next year.

The measure was a longshot from the beginning, but it drew national attention from health care policy observers. Hospitals, doctors and other influential health care providers lobbied intensely against the bill, which they said would lead to longer waits for medical care.

The bill has helped to change the national debate over health care costs and brought a wide variety of health care interests to the table, said Assemblyman Ash Kalra, a San Jose Democrat who wrote the bill.

"This is the type of attention and investment we need to find a solution to the skyrocketing costs of health care," Kalra said.

State Legislature: Why California won't tax business services ... yet

Kalra's proposal would have affected private health plans, including those offered by employers and purchased by individuals. A nine-member commission appointed by the governor and legislative leaders would have set prices for everything from physical exams to allergy tests to heart bypass surgery. No other state has such a requirement.

Prices would have been tied to Medicare's rate for a particular service or procedure, with that price as a floor. There would have been a process for doctors or hospitals to argue that their unique circumstances warrant payments higher than the state's standard rate.

It was backed by influential unions frustrated that health care costs are gobbling an increasing share of employee compensation.

Health care providers warned that price controls would encourage doctors to move out of state or retire, making it harder for people to see physicians when they're sick and force hospitals to lay off staff and in some cases shut down.

Theodore Mazer, a San Diego physician who is president of the California Medical Association, applauded the Assembly "for recognizing that this deeply flawed legislation would result in enormous costs to the state and restricted access to care for millions."

In recent decades, health care spending has risen faster than inflation and wages while employers and health plans have shifted more of the costs onto consumers through higher premiums, deductibles and copays. Americans spend more per capita on health care than citizens of other developed countries.

Meanwhile, a wave of consolidation by hospitals, physician groups and insurance companies has given industry players more power to demand higher rates.