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Legislators grappling with marijuana taxation

By John Howell, Sr.

Publisher Emeritus

The current wrangling in the Mississippi Legislature about how to deal with voter approval of legal medical marijuana sales has engaged my interest.

Prior to its approval last November I didn’t pay much attention — never gave Initiative 65 much chance, especially after the legislature threw in an alternative amendment and other hurdles in hopes of skewing support.

In spite of those obstacles supporters stayed focused and overwhelmingly — 74 percent — approved it. The groundswell caught legislators flatfooted, but they quickly caught on that Amendment 65 would strictly limit the amount of tax revenue they could collect from marijuana cultivation, licensing and sales.

Legislators likely loathe nothing more than leaving alone a potential revenue stream.

Legislatures in most states where some form of medicinal or recreational marijuana consumption has been made legal, have used the collection of revenue for public coffers as one their main justifications for approval.

In California, for example, the state enacted a tax of $9.25 per ounce of flower from dealers and a 15 percent excise tax from consumers. Colorado collects a 15 percent tax from the cultivator-to-seller exchange and an additional 15 percent from seller to consumer. And so on.

With so many states now having adopted some form of reduced or eliminated marijuana restrictions, an apples-to-apples comparison is difficult, but the common denominator in most arguments was the potential revenue from taxing and licensing.

Yet, the authors of Initiative 65 pre-empted the legislature’s taxing options, limiting sales tax to be collected on legally dispensed weed or other cannabis products to 7 percent and limiting other fees charged to users and to dispensaries.

Now, in what has been described as a “Hail Mary,” Mississippi Senate Medicaid Chairman Kevin Blackwell (R-Southaven) has introduced Senate Bill 2765 that would, according to Mississippi Today, “create an alternative or ‘parallel’ medical marijuana program to the one voters put in the constitution.”

As introduced SB 2765 should create a 4 percent tax at cultivation and a 10 percent sales tax. Growers would also be required to buy a $100,000 growing license and dispensaries would have to purchase $20,000 licenses.

Both growers and dispensaries would have to show proof of assets or provide a surety bond of $250,000. The bill was passed by the Senate last Friday and has gone to the House.

Blackwell, with the typical zeal of a legislator anticipating a yet-to-be-reaped windfall, even lauded a vision of what the legislature will do with all that money — “hundreds of millions” for education, etc.

The trouble is that in those states where marijuana has already been legalized to some or great extent, black market cultivation and sales are still thriving, in great part due to the high fees and taxes and onerous licensing requirements that their state legislatures put into place.

Buyers can simply buy weed more cheaply off the street or, more realistically, from the dealer they’ve always known and trusted. That’s not to say that those states have not seen significant tax revenues from legal sales, just to acknowledge that there are always unintended consequences.

Oregon, which has adopted one of the most relaxed approaches to recreational marijuana, took the opposite approach. It kept fees low for growers, sellers and users and allowed licensing requirements to be lax. That worked so well that there were soon too many growers who produced much more product than could be legally consumed in Oregon.

Prices dropped so low, that legal growers couldn’t sell at a profit, so they reverted back to the black market for sale in neighboring states, including Idaho, where authorities soon saw a spike in the number of arrests for transporting the product into and through that state where marijuana prohibition laws have not been repealed.

Unintended consequences again.

It reminds me of when Mississippi repealed its statewide liquor prohibition law in 1966. Each county was given the option for a referendum on whether it wanted legal liquor. Panola voters approved the legalization shortly afterward, implementing the sales system we see mostly intact today.

That summer I worked at the “okra barn” where Brooks Vance Jr. often stopped by. Brooks Vance Jr. was the son of Confederate veteran and post-Civil-War political leader, C. B. “Captain” Vance and the father of longtime Panola County Chancery Clerk, C. B. Vance III.

“Mr. Brooks,” I asked him one day shortly after the local approval. “What do you think about legal liquor?

“I don’t like it,” he told me. “Before, when I wanted a bottle of whiskey, I could call and get it delivered to my house. Now I have to make a trip to the store to buy it.”

(Mississippi Today, quoted above, is a nonprofit, nonpartisan newsroom. Mississippi Today’s roots in coverage of state government have grown to encompass a myriad of state issues. mississippitoday.org.)