A new proposal in California seeks to create a state-run public bank to process newly legal marijuana finances, causing concern that the state’s economic problems are about to worsen thanks to new state-run banking.
Proposition 64, legalizing the sale and cultivation of recreational marijuana in California, was passed back in November 2016, but didn’t go into effect until the first day of 2018.
Most banks and credit unions, however, still do not accept financial deposits from marijuana dealers. The business is largely cash-only.
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Trusting the state to operate a newly created bank sector seems dubious for those who think the state’s economy is already suffering from too much government overreach.
State Treasurer John Chiang announced on Tuesday that the cash-stuffed marijuana industry should be handled by government-owned and operated banks.
According to The Washington Free Beacon, Chiang and Califronia Attorney General Xavier Becerra will consider costs and regulations over the next few months when deciding on how to implement the bank:
The idea drew an immediate rebuke from a major consumer watchdog group, the Consumer Choice Center, who warned it could lead to scandal and mismanagement.
“Opening the banking sector for cannabis-based businesses is necessary, but a government owned and operated bank in California will only invite more problems and prove disastrous to California residents and taxpayers,” said Yael Ossowski, the group’s deputy director.
“For a state that is already plagued with so many economic problems, despite its budget surplus, the idea of a state running its own bank should worry every person in California,” he added, referring to the state’s history of raising taxes to compensate for previous budget deficits and get its finances back in the black.
Chiang said there is added urgency for the creation of such a bank after Attorney General Jeff Sessions earlier this month rescinded Obama administration guidelines that essentially gave the state a pass when it came to enforcing federal laws outlawing the sale and use of marijuana.
“California and other states will need to lead when it comes to bringing the cannabis industry out of the shadows so that it can be properly regulated to prevent sales to minors, to protect the public’s health and safety, and ensure cannabis businesses behave as legitimate, tax-paying members of our economy,” he said Tuesday during a conference call with reporters and other interested parties.
“The recent action taken by Attorney General Sessions threatens us with new national divisiveness and casts into turmoil a newly established industry that is creating jobs and revenue,” he added.
While Chiang cited law and tax enforcement reasons, there are plenty of practical reasons too. Most banks and credit unions won’t accept deposits from marijuana businesses, making the mainly cash-only business more difficult to operate. The few financial institutions that do allow the deposits operated under the 2013 federal guidelines that Sessions revoked.
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Essentially, Chiang is worried that businesses currently reliant on cash aren’t paying their taxes. The solution, according to him, is bigger government.
Chiang also says stricter government regulations on the new industry are required to make sure businesses aren’t selling to minors.
Consumer Choice Center seems concerned with California’s history of deficits and subsequent tax increases. Could a state-owned banking system make things even worse? Not if the Californian government can be trusted to save more than it spends. But when has that ever happened?
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