How bad is California's business climate?

Well, it says something that even Jerry Garcia's pot company is fleeing the state for greener pastures, so to speak, for the same reasons all the other companies voting with their feet are.

According to SFGate.com:

The Garcia Hand Picked brand, launched by the deceased musician’s family in 2020, has pulled out of the state, a spokesperson confirmed to SFGATE. Garcia’s exit comes as cannabis insiders predict a “mass extinction event” for California’s pot industry, with thousands of companies expected to go out of business this year. 

Andrew DeAngelo, a cannabis consultant and former owner of Harborside, one of the state’s pioneering medical cannabis dispensaries, said the Garcia brand probably learned the same thing that all of California’s pot companies have realized: “You can't make any money in this market.”

“Not only is Garcia leaving, a lot of people are leaving,” DeAngelo told SFGATE. “It’s a real shame that California is losing out. We’re losing out on jobs and economic activity and other places are benefiting from that.”

Well, I wouldn't be so sure about that last argument, given that they sell a product that turns their customers into blithering, gibbering idiots, and contributes to road crashes and spray shootings, but the argument is sound that they are being chased out by high taxes and regulations.

California’s cannabis industry has faced huge economic hurdles in its first four years of legal sales. The state’s complicated cannabis regulations and high taxes add costs to legal operators, while widespread illegal farms and retailers undercuts legitimate companies. Limited access to banking means these companies pay exorbitant fees for simple banking services and have almost no access to loans. Federal law blocks pot companies from deducting most business taxes from their federal taxes, making pot businesses pay an effective federal tax rate as high as 80%. 

These factors have come together to make California a painful place to run a legal pot business. The majority of small legacy cannabis farms are on their way out of business and even the country’s biggest cannabis companies are leaving the state.

If you are going to have a responsibly run pot industry, you've got to tax and regulate it fairly, and stomp out the illegal competitors. Apparently, the illegal pot growers, who pay nothing in taxes and can sell any unregulated poison to the public are having a field day, driving out the legal pot producers, who contract with the Garcia family's experienced pot consumers, and make it impossible to do business at a profit.

Now the Garcia family has joined the exodus of businesses in flight from California, some 54 big ones with big names such as Tesla, Hewitt-Packard, Oracle, Palantir, American Airlines, Kaiser Aluminum, Charles Schwab, lots of biggies and dozens of little ones, according to BuildingRemote.com. A slightly older study from the Hoover Institution, dating back a few years, suggests that when business facilities are counted, the numbers go into the thousands.

Legal pot growers and packagers (which the Garcia family seems to be) are no different. The legal pot growers have another special problem with staying in business that many other businesses don't, in that when the price of the product goes too high, and I'm not talking about THC, the customers easily know where to go to buy from the black market, run by criminals. Those bad operations are growing and expanding while legal pot farms are saddled with California taxes.

Tax, regulate, let criminals run wild, and watch how fast businesses look for a way out. The Garcia family marijuana sales company is no different, and sure enough their product is now just about absent from California pot shops now. They still sell their brand in Colorado, Oregon, Massachusetts, Maryland and Michigan, so they may be relocating to one of those high-tax blue states -- which apparently is still a better deal than what they are getting in California, and that is saying something.

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