Advocates of marijuana legalization are pleased following agreement last Monday among House and Senate negotiators on Beacon Hill on an implementation package for recreational marijuana sales.
I understand the short-term euphoria. By July 1, 2018, you will be able to purchase marijuana legally in a state once dominated by Puritan morality and blue laws.
“While we don’t approve of every provision of this bill, we are satisfied that the outcome will serve the interests of Massachusetts residents and allow the Commonwealth to displace the unregulated marijuana market with a system of taxation and regulation,” said Matthew Schweich of the Marijuana Policy Project, an advocacy group behind last November’s ballot initiative.
But will this legislation create a well-regulated marijuana market, suppress illicit drugs, yield reliable state tax revenue in the long term and pass constitutional muster?
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Hard to say.
In the first place, lawmakers have clearly not respected the will of voters on timing or taxes.
They delayed retail sales by six months, to July 1, 2018. A minor point, perhaps, but a telling one. Legislators, who for years refused to act on recreational marijuana, developed zeal for regulating it only after voters acted. Yet, if legal pot is a financial windfall, the six months of delay is simply depriving the state of potentially millions of dollars in revenue.
Beacon Hill also added a potentially fatal constitutional twist, declaring that communities that voted “yes” in November can proceed with retail sales (provided they haven’t already banned them), whereas in communities that voted “no,” local officials get to decide whether recreational pot comes to town.
Sorry, but laws should apply equally to all. Tailoring siting processes to how individual communities voted is absurd. The potential for uneven and unfair implementation of the law is high, as is the likelihood of lawsuits.
But the biggest concern is the proper level of taxation, a question that is explored in depth by Jonathan P. Caulkins (“A Principled Approach to Taxing Marijuana”) in this summer’s issue of National Affairs.
Here, lawmakers’ disrespect toward Massachusetts voters is made most clear.
Last November, we voted for a 3.75 percent tax rate, with a 2 percent additional local tax option. Added to the state’s regular sales tax rate, that would have meant a maximum 12 percent tax on cannabis. Instead, lawmakers set an overall state tax rate of 17 percent, with a 3 percent local option — up to 20 percent overall.
Caulkins points out that taxing recreational marijuana too steeply tends to leave black markets in place. Indeed, even Colorado, whose legal pot market is the oldest in the nation and yields millions in revenue, is looking to scale back its nearly 30 percent overall pot tax amid reports that the black market continues to flourish.
On the other hand, Caulkins notes, you don’t want to tax marijuana too low. Consumers are always willing to pay some tax for a product that is legally available and of reliable quality — alcohol being the most obvious example.
Disrespect aside, then, did the Legislature arrive at the right level of marijuana tax?
Again, it is hard to know. As the number of states legalizing recreational pot grows, so do potential disparities among tax rates, disparities that may encourage cross-border traffic, legal and illegal alike.
Caulkins suggests the long-term solution is a uniform federal tax on marijuana, but that seems politically impossible until the blanket federal ban on marijuana is lifted.
With polls showing a majority of Americans favor pot legalization, that day may come sooner than we think. But in the meantime, lawmakers must deal with existing realities. I suspect a 20 percent overall tax is too high to discourage illicit markets, but we’ll see.
Also unknown is whether opponents of legalization were right when they predicted that the social ills accompanying higher marijuana consumption will offset the tax revenue it generates. Will legal pot be a net gain for the state budget?
Again, no one knows. Thus, until we have answers, lawmakers would be smart to put marijuana tax revenues into reserve, and not rely upon them to fund general operations.
Our Legislature’s penchant for overly optimistic budget forecasting is legendary, and while I’d prefer not to fund schools, libraries and social services with marijuana taxes at all, it would be still worse to do so only to see those revenues go poof when consumer habits or tax realities change.
The bottom line on marijuana taxation is a warning for lawmakers and users alike: Don’t get too high on the stuff.
Chris Sinacola is a Worcester Sun columnist. His observations on politics, current events, history and more appear every Sunday.