Home Economy Supporters of legalized cannabis touting the financial benefits

Supporters of legalized cannabis touting the financial benefits

By

Cassius Shuman

-

03/11/2022

THE RECREATIONAL MARIJUANA LEGISLATION introduced in the General Assembly on March 1 could bring in $20 million annually in state tax revenue, but supporters say the payoff could be much bigger. / PBN FILE PHOTO/MICHAEL SALERNO

State leaders are banking on $18 million to $20 million in additional tax revenue annually if the recently introduced legislation to legalize recreational marijuana is approved, but supporters of legalization say the financial benefits could go far beyond that. The legislation filed on March 1 by Sen. Joshua Miller, D-Cranston, and Rep. Scott A. Slater,

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State leaders are banking on $18 million to $20 million in additional tax revenue annually if the recently introduced legislation to legalize recreational marijuana is approved, but supporters of legalization say the financial benefits could go far beyond that. The legislation filed on March 1 by Sen. Joshua Miller, D-Cranston, and Rep. Scott A. Slater, D-Providence, would set a state tax rate of 17% on the sale of cannabis at licensed retail centers, starting Oct. 1. An additional 3% excise tax would go to municipalities where the sales take place. Miller says an estimated $20 million in new state tax revenue is realistic for the first year of legalization, even though the regulatory system would be in the early stages of rolling out. He says the estimate is based on calculations made a few years ago that still apply. But, Miller warns, any more delays in approving the legalization of recreational marijuana would likely shrink those revenue figures. “More and more of our revenue is [disappearing with] consumers that are getting into the habit of going to nearby Massachusetts or Connecticut,” Miller said. Massachusetts legalized recreational cannabis in 2016. Connecticut took that step last July. What gets excluded from revenue estimates for legalized marijuana is additional money derived from economic ripple effects, such as added jobs and increased property values, said Jared Moffat, state campaigns manager for legalization advocate Marijuana Policy Project in Washington, D.C. “It's easy to imagine, for example, how old warehouses will be repurposed, and new employment opportunities will crop up in localities that allow cannabis to be produced and sold in [Rhode Island],” Moffat said. “There's evidence that cannabis businesses have a positive impact on property values as well.” A recent report on marijuana-related jobs produced by Leafly.com, a website focused on cannabis use and education, says the industry supported 428,059 full-time equivalent jobs nationally, as of January. Last year, the industry created an average of 280 new jobs per day, a 33% increase in a single year, the fifth year in a row of annual jobs growth greater than 27%, the report said. Rhode Island officials haven’t released estimates for jobs that might be created in the state if the legislation for recreational marijuana is approved. The legislation filed in both Rhode Island legislative chambers calls for up to 24 retail licenses distributed in six zones statewide, with a 7% sales tax, a 10% state excise tax and a 3% local excise tax. Under the measure, cities and towns could opt out of allowing marijuana retail sales and receiving the revenue from the 3% tax but would have to place a referendum question on a local ballot in November. Once opted out, a municipality would have to seek an act of the legislature to opt back in. It's not clear how much money the 3% local tax would bring in for municipalities. With market research firm Grand View Research Inc. forecasting that national tax revenue from legalized marijuana will reach $71 billion by 2028, Moffat says he doesn’t expect many cities and towns to opt out. “I suspect that many communities will understand that, even if some residents are not supportive of legalization, opting out means fewer jobs and less revenue for the municipality,” he said. “I'm fairly confident a few towns opting out will not make a substantial difference to the overall ramp up for the market and overall tax revenue for the state.” Gov. Daniel J. McKee’s proposal for the legalization of recreational marijuana is similar to the plan introduced by Miller and Slater. However, the estimates differ on how much revenue the industry will bring in. In his budget proposal, McKee projected $1.2 million for fiscal 2023 and about $18 million for a full fiscal 2024. How has tax collection gone in neighboring states? Connecticut’s recreational marijuana industry is still too new to have full-year numbers, but in Massachusetts, state revenue has climbed as the industry has ramped up, from $66 million in 2019 to $205 million in 2021. The Marijuana Policy Project says the cannabis tax in Massachusetts raised about $19 million annually per 1 million residents for the first three years of legalized recreational sales. That bodes well for the estimates cited by Miller, Moffat says. “Given that Rhode Island's population is just over 1 million, I think $20 million is a reasonable projection,” he said. Moffat says Massachusetts’ tax revenue has now leveled off at about $35 million annually per 1 million residents. “So, I think $40 million a year for Rhode Island is probably the upper limit with the tax scheme being proposed,” he said. Still, there remains a big complicating factor that could affect the tax revenue collections: Rhode Island is already years behind Massachusetts even if legalized recreational cannabis is approved this legislative session. Some consumers have already crossed state lines to make their marijuana purchases. “Consumer habits can shift, though, and most don't become loyal to just one store,” Moffat said. “For most Rhode Islanders, there will hopefully be an in-state store that is closer than traveling to Massachusetts.”