Recreational pot bill proposing 9% tax clears first hurdle
By Andrew Oxford
Proponents of legalizing marijuana have long pointed to a prospective windfall they say state and local governments could enjoy by taxing products that now circulate on the black market.
But the sponsors of a bill to legalize marijuana in New Mexico have an unlikely goal.
They don’t want to tax it too much. And there’s a reason why.
“Our goal was to stay under 20 percent,” said Rep. Javier Martinez, a Democrat from Albuquerque who is co-sponsoring House Bill 356, known as the Cannabis Regulation Act.
The law would set a relatively moderate excise tax of 9 percent on marijuana. Local governments could add up to 3 percent. State as well as local gross receipts taxes would apply, too.
While other states have charged more, the idea is to ensure that marijuana sold on the legal market can compete with the black market.
Colorado has a 15 percent excise tax as well as a 15 percent sales tax, according to data compiled by the Tax Foundation. Nevada has a 15 percent excise tax, too, as well as a 10 percent sales tax. Oregon’s sales tax on marijuana is 17 percent. Washington charges 37 percent.
Too high a rate can put a damper on the legal market, the Tax Foundation has said. When rates are higher, legal products may not be competitive enough with products on the black market, keeping illicit trade alive.
Proponents of New Mexico’s law have tried to avoid promising too much when it comes to the funds that legalizing marijuana could raise, in part because of that balance.
Instead, they have focused on the idea’s popularity, the issue of equity and righting the wrongs of the war on drugs, as well as the economic opportunities that could come with launching a new industry.
A newly published analysis by the state Taxation and Revenue Department gave a glimpse of what the state could expect from passing House Bill 356, though. It projected annual revenue ranging from $19 million in 2021 as the program is starting up to $34 million within a couple of years of implementation, around 2023.
County and municipal governments could raise another $22 million a year by 2023, the analysis found.
Under House Bill 356, most of the money raised by the state would go to the general fund.
But 20 percent would go to a proposed Department of Health fund that would provide job placement, mental health treatment and substance use disorder treatment in communities disproportionately affected by state and federal drug policies.
Another 14 percent would go to research of medical and recreational cannabis as well as substance use disorder, and to help run public education campaigns to discourage driving under the influence and use by youths. Some of that money would also go to a DWI program.
Lawmakers raised questions about how best to split up the money for law enforcement and traffic safety on Saturday as the bill got its first committee hearing of the legislative session.
Ultimately, the House Health and Human Services Committee voted 5-2 along party lines to advance the measure without changes. It goes next to the House Judiciary Committee.
The bill’s sponsors signaled they are open to some suggestions for changes, though.
While the bill drew a long line of supporters who implored lawmakers to embrace what several described as an idea whose time had come, the debate also hinted at the myriad technical issues that lay ahead and make the whole act something of a long shot this year.
HB 356 would legalize the use of marijuana among people over the age of 21 starting in 2020. It also would set up a system to regulate the cultivation and sale of marijuana while also allowing local communities to opt out of allowing the sale of cannabis.
The bill would erase records of past marijuana-related arrests, charges and convictions.
Patients in the state’s Medical Cannabis Program have raised concerns that legalizing marijuana for recreational use will upend their market.
“We want to make sure there are still establishments that cater directly to cannabis patients,” said Emily Kaltenbach of the Drug Policy Alliance, which has worked on the bill.
Kaltenbach said the law would require recreational cannabis dispensaries to also serve patients in the medical program. And licenses for running a medical dispensary would remain cheaper. Moreover, the law would exempt medical cannabis from the state’s gross receipts tax.
Business groups, including the Association of Commerce and Industry, have raised concerns about employer liability provisions.
Lawmakers are bound to raise more concerns about policing impaired driving.
One lawmaker proposed amending the bill during Saturday’s hearing to significantly limit the sale of edible products, such as cookies or candy.
Rep. Bill Pratt, D-Albuquerque, proposed banning the sale of recreational-use cannabis edibles that contain salt, sugar or other sweeteners. The retired physician said he was worried that children might try to consume edibles if the products seemed appetizing.
Pratt had only intended to ban such edibles for recreational use, not from the medical program. But his amendment was worded differently, and he withdraw the suggestion.
Proponents noted the bill already restricts advertising of marijuana by, for example, prohibiting marketing such products with cartoon characters. Products could not be designed to appeal to children, either.
Still, banning edibles with sugar or salt raised the question: How would that taste?
“The omission of sweeteners or salt from edible products would not only make them unattractive to children but unattractive to adults,” said state Rep. Karen Bash, D-Albuquerque.