OAKLAND POT TAX FUELS STATEWIDE CAMPAIGN

OAKLAND -- Bill O'Donnell illegally self-medicated himself with
marijuana for years for a combat injury and post-traumatic stress
from military service in Vietnam. It landed him in jail once for possession.

Today, O'Donnell, 58, legally selects medical marijuana pot brands
from the "bud tender" at the Coffeeshop Blue Sky in downtown Oakland.
And he feels proud the dispensary soon will pay taxes on his
purchases -- thanks to Oakland's passage of the nation's first
cannabis taxation law on July 21.

"I've gone all the way from doing 60 days in jail to paying taxes on
this," O'Donnell said. "I'm glad to help out -- legitimately."

When 80 percent of Oakland voters approved a gross receipts tax that
charged the city's four pot dispensaries $18 for every $1,000 in
revenue, they added political smoke to efforts in other California
cities to treat municipal budget deficits by taxing medical marijuana revenues.

The Oakland vote also stoked a calculated self-taxation movement by
cannabis advocates. Oakland medical pot dispensaries that all but
begged to pay new taxes are backing a 2010 ballot initiative drive to
legalize marijuana for personal use and soothe the Golden State's
fiscal woes with more than $1 billion in state cannabis taxes.

"This is just one tax of many. It's one battle in a big war," said
Richard Lee, owner of Coffeeshop Blue Sky. "It's a reverse tax
revolt: No taxation without legalization."

Lee, founder of TaxCannabis2010.org, also is president of downtown
Oakland's Oaksterdam University, an unusual trade school that teaches
marijuana cultivation, retail management and advocacy.

He says the school expects to donate $500,000 for signature gathering
for the proposed California Cannabis Initiative.

The Oakland tax vote and the broader intentions of pro-pot activists
alarm some law enforcement and anti-drug use groups.

"We're concerned about the storefronts that are trying to legitimize
this," said Lori Green, a spokeswoman and parental advocate for the
Coalition for a Drug Free California. "It's just another tactic to
mainstream marijuana use into our everyday life. Later on, we're
going to pay triple or more in costs of new addictions than any new
taxes are going to cover."

Oakland City Council member Rebecca Kaplan, who won unanimous support
for her resolution to put the Measure F pot dispensary tax before
voters, said the tax on cannabis sales could generate $1 million for the city.

Originally, the Oakland city auditor estimated the tax would produce
$300,000 annually. But Kaplan said Oakland is seeing a surge in
medical marijuana licenses and sales after U.S. Attorney General Eric
Holder announced federal authorities will no longer prosecute
dispensaries operating under California's 1996 medical marijuana law.

Kaplan said Oakland's new tax, which takes effect Jan. 1, reflects
"the world in the way it has already changed.

"I do definitely see this as a shift in the political winds in terms
of how people are talking about medical marijuana, marijuana reform
and budgeting," Kaplan said.

In Los Angeles, City Council member Janice Hahn recently introduced a
motion to create a "cannabis business tax" she said could generate up
to $32 million a year from as many as 400 Los Angeles pot dispensaries.

Hahn said the pot tax motion, cosigned by fellow councilman and
former police union leader Dennis Zine, was inspired in part by the
state's fiscal raids on local budget coffers.

The newly approved state budget borrows $2 billion from local
governments and takes another $1.7 billion in redevelopment funds. It
would transfer nearly $113 million from Los Angeles to the state this
fiscal year, according to a Web site.

"They're coming after even more money from the municipalities," Hahn
said. "It really was a motivation to say, 'Hey, here's a new business
cropping up -- pardon the pun. Let's explore how we can create a new
category for cannabis and tax them on their gross sales.'

"Maybe that will mean some services we won't have to cut, some jobs
we won't have to get rid of and some police officers we can keep."

The city of Sacramento last month imposed a 45-day moratorium on new
medicinal marijuana businesses after an estimated two dozen pot
dispensaries opened in town. But the city is working to draft an
ordinance governing the establishments -- a move that could
eventually open the door to imposing a local cannabis tax.

"Everything is on the table right now," said City Council member
Sandy Sheedy, who said the city is "starting from scratch" in
deciding what to do about its burgeoning medical marijuana trade. "We
were watching the vote on that (in Oakland). I was a little surprised
it won by 80 percent."