Over the holiday weekend, published reports in various outlets indicate that the Governor, the Senate President and the Assembly Speaker have reached an agreement on the major broad strokes of legalization and regulation of adult cannabis use. It has also been reported that news of this consensus on major sticking points was leaked prematurely, as other important issues, including issues of particular interest to municipalities, are still being negotiated.
From these news reports, it appears there is an agreement on how the state would tax cannabis products. It is our understanding, however, that while progress has been made, a number of issues still need to be worked out.
The current legislative proposal sets the tax rate at 12%, which would include the State’s current sales tax. While the Governor’s office never publicly stated what it believes the tax rate should be it has been reported consistently that the Governor wanted a 25% tax rate. Now, there is an apparent agreement to instead implement a $42 per ounce state tax on the sale of recreational cannabis. The rationale behind this new approach is that taxing cannabis sales by weight will mitigate any negative impact based on market demands and provide a steadier revenue stream to the State.
Here are some important takeaways for local officials:
• It is our understanding that there is no agreement in place on the rate of the local option tax. The current proposal includes an optional 2% excise tax on any of the 4 proposed licenses. The League continues to argue that municipalities should have the flexibility to implement a rate up to 5%. This is still an area of negotiation.
• It is also our understanding that issue of expungement and restorative justice is still subject to negotiation. Currently, the bill allows for the automatic eligibility for expungement of convictions for possession of 50 grams or less of marijuana. There remain concerns regarding an individual’s cost of seeking expungement, which can be time-consuming, complicated and burdensome. This too is still an area of negotiation.
Some media accounts have suggested that a final vote could come this month. That would appear very unlikely since there are a number of outstanding issues. Further, even with an agreement in place the respective legislative caucuses would need to be briefed, votes would need to be whipped and there could be further hearings and amendments on other issues. Thus, it appears more likely that a vote could come by the end of March.
Please take action and contact your Legislators immediately and let them know your thoughts on the issue. Further, we urge you to prioritize the issues highlighted above, that is the need to increase the 2% local option tax to 5% so that taxpayers are made whole and full funding and expansion of the expungement provisions. Your timely outreach to your State representatives can help us achieve a positive outcome for municipalities.
The League’s November 27 letter has additional details as does the PDF of the free webinar offered by the League on November 30 and the Cannabis Legalization web page.
Contacts: Michael F. Cerra, Assistant Executive Director, email@example.com, 609-695-3481 x120.