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Calls to legalize marijuana and create a new source of income have taken on a new urgency as New Jersey faces a year-long financial crisis following the coronavirus outbreak.
But how much cash could really net sales? With uncertainties about the virus and just one question on the loosely worded ballot that seeks to boost the industry, pinpointing numbers is difficult.
Outdated estimates indicate that the state could see hundreds of millions in taxes. Others assume that the industry, which will create jobs that go beyond dispensaries, could have a greater impact. Gov. Phil Murphy’s past budget proposals, when he thought the state would see marijuana purchases in 2018 and 2019, put the first-year figure at $ 60 million lower and then $ 80 million for medical and adult use.
But obviously, the state never saw a penny of legal herb sales, as lawmakers didn’t pass a law legalizing recreational marijuana. And all while the black market continued to flourish, selling approximately $ 850 million in marijuana a year, while police arrested nearly 100 people a day for marijuana-related crimes.
Murphy said last week that legalizing the herb for adult use would be “incredibly smart” to offset the state’s budget woes.
“We are not inventing marijuana,” he said. “Exists.”
That is the familiar cry of advocates of legalization. A recent Gallup poll found that 12% of Americans already use cannabis, a number that reaches nearly 1 million of Garden State’s approximately 9 million residents. Those people, along with perhaps 12% of the state’s 100 million annual visitors, could become customers in a fully realized market, where constant supply and the presence of numerous dispensaries can make prices more competitive with the black market.
But even if voting on the ballot question to legalize this fall changes a change, generating tax revenue will not be that easy.
Can you change budget problems tomorrow? No, because we haven’t done what we have to do to get us there, ”said Jackie Cornell, head of health policy and innovations in 1906, a cannabis grocery brand seeking a state license to grow and sell in New Jersey.
While state lawmakers could work to pass legislation that would describe the legal market before the vote, they have not. And a Cannabis Regulatory Commission, which should have taken over the running of the medical program and established the regulations in January, has only one of the five appointments necessary to run it.
State Senator Nicholas Scutari, D-Union, who sponsored a long-standing bill that seeks to legalize marijuana sales for those 21 and older, said he hopes the Legislature can use that framework and quickly pass enabling legislation.
“Fortunately, we are in a better position for legalization,” he said. “We were very close to passing enabling legislation. That legislation is probably a framework for enabling legislation. A lot of effort was given. ”
But this industry is no stranger to delays, and lawmakers didn’t pass that bill before. Dispensary licenses and opening dates in the New Jersey medical marijuana program have affected the delays. Ten years after lawmakers approved medical marijuana, the state has only 11 dispensaries, two of which opened in June. Three others that received licenses to operate at the end of 2018 have not yet opened their doors.
Despite the fact that cannabis sales will certainly increase revenue, it is unclear how much.
“From a tax revenue perspective, there are many unknowns,” said Scott Rudder, president of the CannaBusiness Association of New Jersey, the state’s largest industry trade group. “There are people who have talked about setting potential fees to help with infrastructure, help with education. He is still unknown. COVID-19 has had a significant impact on the projections. “
A 2016 New Jersey Policy Perspective report estimated that direct marijuana sales would produce $ 305 million in tax revenue, if the rate increased to 25% and some 100,000 people from New York and Pennsylvania came to New Jersey to buy marijuana.
But the question on the ballot about which voters will decide issues related to the state sales tax, at 6.625%, with the possibility of local taxes.
“If lawmakers are going to insist on keeping that tax rate absurdly low, I think people should expect very little revenue,” said Brandon McKoy, president of the New Jersey Policy Perspective and author of the 2016 report.
Massachusetts earned $ 420 million in taxes from 33 retailers in 2019, its first full year of sales. But the state set the rate at 17%, and some municipalities added an additional 3%.
Illinois, which saw its first sales in January, made $ 52 million in six months. The state has some of the highest taxes in the nation, at 26-41%.
But McKoy said he purposely kept his conservative 2016 estimate.
“I did not take into account the paraphernalia, all the indirect services that could be generated: accountants, law firms, property purchases,” he said. “If you throw all of that in there, and use it as a frame, it could be a trillion dollars.”
Those huge estimates are becoming common. Nationwide, cannabis companies could contribute $ 130 billion annually to the US economy by 2024, according to the latest estimate in the Annual Marijuana Business Factbook.
But legalization could also bring immediate savings to New Jersey. A 2017 report by the American Civil Liberties Union estimated that the state spent $ 143 million on prosecuting marijuana possession offenses, with a disproportionate target for black consumers.
“It is an important industry in its own right, where taxpayer dollars are spent like water in a stream to pursue this natural substance called cannabis,” said Scutari, who has advocated legalization as social justice reform. He also said that the lower tax rate could help New Jersey eradicate the illicit market.
Still, it will take time for the legal market to grow enough to compete with the black market. Almost 80,000 patients must use the few dispensaries scattered across the state, and report poor product quality, high prices, and shortages, thanks to lack of competition.
“That’s part of the reason it’s not booming the way it could be,” said Cornell, a former deputy chief commissioner for the state Department of Health. “Competition is what you see the price drop. If we approach this from the mindset of ‘how do we open as many facilities as quickly as possible?’ I think that would create a great incentive and a boost to the budget. “
New Jersey is not the only northeastern state seeking relief from cannabis sales revenue. Pennsylvania and New York have taken initial steps to legalize marijuana, but Garden State could win the race, attracting consumers from other states who would not only pay taxes here, but could fill the fuel tank, stop in Wawa, or make other purchases. . that benefit Garden State companies.
If dispensary licenses, and therefore sales, languish, New Jersey could lose those customers.
And even with the lowest state tax rate, some say that potential fees and local taxes could help school districts and municipal services, such as sanitation workers.
“All of that will have a dramatic impact at the local level,” said Rudder, a former mayor and state assemblyman. “The towns that allowed cannabis companies in their jurisdiction will make a profit.”
But skeptics remain. The short question on the ballot does not include clues about how the industry would handle the problems of social and criminal justice and equity in the industry. It reads as follows:
“Do you approve of amending the Constitution to legalize a controlled form of marijuana called ‘cannabis’? Only adults at least 21 years old can use cannabis. The state commission created to oversee the state’s medical cannabis program would also oversee the new market for cannabis for personal use. Cannabis products would be subject to state sales tax. If authorized by the Legislature, a municipality can pass a local ordinance to collect a local tax on cannabis products. “
“The ballot question doesn’t really solve anything,” McKoy said. “All it does is give legislators more time to decide what to do. That doesn’t fix any of the really micro problems that people disagreed on. We’ll just go back to the starting point of these things. “
With only 104 days left for the election, some may see the clock approaching the end of a long fight. But for others, it is only the beginning.
“November is not the end,” said Cornell. “In some ways it’s just like the new beginning of the next chapter on this journey.”
It all depends, of course, on whether the people of New Jersey vote in favor of legalization.
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Amanda Hoover can be contacted at [email protected]. Follow her on Twitter @amandahoovernj.
