Oregon and Washington Legal Cannabis Taxation Schemes Under Review
How a state will benefit from marijuana excise tax revenues is a central plank of any cannabis legalization rhetoric. Initiative petitioners and campaign supporters of marijuana legalization efforts often stridently extol the expected impact marijuana excise taxes will have on social programs that provide crucial services to their state’s most vulnerable citizens.
Both pundits and potheads tells us that everything from law enforcement agencies to mental health and drug abuse prevention programs to education and human services organizations will thrive as a result of the funding they will receive from a well regulated and taxed legal marijuana industry. And, so far, they’re right.
In Colorado, the state pulled down $8.8 million from marijuana related taxes for the month of January 2015. That’s a tenfold increase over the previous January and Colorado’s best tax haul since Amendment 64’s first batch of stores opened in 2014. Among the recipients of the almost $9 million in marijuana taxes collected for January 2015 was Colorado’s educational system, which received over 26% of January’s marijuana tax revenues, totaling $2.3 million.
According to Washington State Liquor Control Board records, Washington’s I-502 recreational marijuana program has generated over $26 million in tax revenues through March 1 of this year, averaging $3.25 million a month in tax revenue since the first 25 retail stores opened up in July 2014.
And those numbers are far more impressive than one might think. Washington’s legal pot program continues to endure a myriad of challenges that have thus far limited the scope and success of the program to a fraction of its potential. Despite a self-destructive licensure cadence by the Washington State Liquor Control Board, an over-the-top tax scheme and widespread marijuana moratoriums and local authority objections throughout the state, Washington’s pot program has generated over $100 million in legal marijuana sales and contributed mightily to the well-being of Washingtonians. And truly, that $100 million in legal marijuana sales has been achieved by the 570 bureaucratically hamstrung but impressively determined Washington businesses currently licensed under the I-502 program makes its success to date even more amazing.
Unfortunately, how legal marijuana is currently taxed, and who gets to tax it, is increasingly mucking up the implementation and success of legalized marijuana programs, especially in Oregon and Washington, where both states are attempting to ratify proposed changes to how their legalized recreational marijuana programs should be and will be taxed.
In Washington state, it appears that the legislature and the WSLCB has finally accepted that the current I-502 tax model of a 25% excise tax on every stage of the sales cycle is untenable. Washington’s House of Representatives is pitching a measure that would eliminate the three-tier tax structure in lieu of a 30% excise tax assessed only to the retail sale transaction.
It’s a fairly solid idea. The goal of HB 2008, sponsored by Rep. Reuven Carlyle (D – Seattle), is to reduce the consumer price point of I-502 retail marijuana to a level that’s more competitive with black market pricing than the current tax rate will allow. And the taxation revenue HB 2008 would generate is very close to that of the existing structure. For example, if we apply the tax rate proposed by Carlyle’s measure to the total I-502 retail sales through March 1 2015, it would have generated almost $21 million. Though that figure is approximately $5 million less than the current tax scheme generated in total, the increase in sales from consumers who turned away from the black market, and the resulting additional taxation revenue from the added retail sales to those now ex-black-market consumers, could result in the net gain of taxation revenue for Washington’s pot program and a win for consumers.
Meanwhile, in Oregon, all hell is breaking loose. As the Oregon Liquor Control Commission selects its Rules Advisory Committee members and the Joint Committee on Measure 91 Implementation sallies forth with their bizarre Measure 91 recommendations and Oregon cities and counties continue to defy Measure 91’s voter approved language and pass their own local taxation schemes, some as high as 25%, it’s clear that nothing is clear, except for our politicians’ willingness to completely disregard the will of the people by changing significant and fundamental characteristics of the marijuana legalization measure passed by Oregon voters last November.
More than 30 Oregon cities had the guile to adopt Measure 91 taxation plans in advance of the Measure being approved by Oregon voters or prior to its implementation. The tax-plan pile-on continues with multiple Oregon cities blatantly defying Measure 91’s stated taxation rules and passing, in at least one case, quite excessive local marijuana taxation plans.
The most recent local authority to implement a local tax on marijuana sales is Jackson County, where voters approved a tax of up to 25% on marijuana sales in unincorporated areas of the county. The logic bolstering these local taxation plans ranges from “if we do it before July we’ll be grandfathered in” to a belief that, as written, Measure 91 exceeded its authority to limit the taxing authority of Oregon’s legal marijuana industry to the state exclusively.
And most of cities and counties don’t seem to care or realize that they are already set to receive significant shares of the tax revenues the state collects from Measure 91 licensees. All of the money collected by the Oregon Liquor Control Commission under Measure 91 will be remitted to the State Treasurer, who will then transfer the money into The Oregon Marijuana Account, a separate and distinct account from the General Fund. Distributions from the account to Oregon tax-funded programs will occur each month. Measure 91 requires the state to distribute taxation revenues from Oregon’s legal marijuana program as follows: 40% to the Common School Fund; 20% to the Mental Health Alcoholism and Drug Services Account; 15% to the State Police Account; 10% to Oregon Cities; 10% to Oregon counties; 5% to the Oregon Health Authority.
Depending on whose math you believe, that payout structure will generate anywhere from $11 million to $41 million to Oregon Cities and Counties, an amount likely to dwarf what a City or County could collect via their local schemes. Maybe they’re greedy, maybe they’re disingenuous and excessive taxes are just an oblique route to a ban, maybe they’re misinformed… maybe they shouldn’t get their $11 million or $41 million from Measure 91 if they’re going hamper its implementation?
