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Expert: Recreational marijuana in Minnesota could bring in $300 million in taxes

About 7.9 percent of Minnesotans say they used cannabis in the last month.
REUTERS/Steve Dipaola
About 7.9 percent of Minnesotans say they used cannabis in the last month.

Recreational marijuana could produce $1.12 billion in sales within five years of legalization, creating 20,000 direct and indirect jobs and $300 million in taxation.

That was the estimate offered Wednesday by a Denver-based marijuana industry consultant who keynoted a Minneapolis conference on the impacts of legalization business and government. 

Sal Barnes, a director of the Marijuana Policy Group, which consults with both business and government on marijuana policies and planning, based that estimated on Minnesota having a slightly smaller market potential than the comparably populated Colorado.

About 7.9 percent of Minnesotans say they used cannabis in the last month, a figure that is below the national average of 9.5 percent and well behind usage rates of 20 percent in states that have legalized recreational usage, such as Colorado. That, Barnes said, is the difference between 860,000 customers in Colorado and 341,000 in Minnesota for states that are nearly equal in population of adults over age 21.

Of daily users, there are 115,000 in Minnesota and 342,000 in Colorado. “Marijuana follows the 80-20 Rule,” Barnes said. “Twenty percent of the consumers produce 80 percent of the market.” Those heavy users are defined as daily users.

Usage rates do increase once a state legalizes recreational marijuana, while the participation in medical marijuana programs, like the one Minnesota now has, tends to decline.

Regulation and taxation key

Barnes was part of the CannConMN Symposium in Minneapolis aimed at examining the implications of a legal marijuana market for business and investors. The gathering was sponsored by the publisher of Minnesota Lawyer and Finance and Commerce.

Barnes said that governments that legalize recreational marijuana have to get regulation and taxation just right. “If you guys are going to create a $1.12 billion adult-use market, the number one thing you can do is have the appropriate amount of licenses for cultivation, manufacturing and retail,” he said. “There is a delicate balance … on one side is Oregon with unlimited amount of licenses and on the other side is Colorado, where they try to parse out the types of licenses. You have to make it competitive enough to compete with — and preferably end — illegal black markets, but not so uncontained that there is too much supply and no profits for businesses.”

He counts Colorado, where he consults with the government agency that regulates cannabis, among those that have gotten that balance right. Colorado’s taxes make prices in the legal market close enough to those in the black market so as to not drive customers to make illegal purchases.

On the other side is Oregon, which has done little to cap the number of producers and sellers, said Barnes. The result is a glut of marijuana, some of which has flowed across state lines into illegal sales. 

“The challenge you’ll see is if you have too many or too few licenses you will encourage the black market,” he said. And because marijuana is legal only in certain states, each market is separate, bound by the borders of each of those states, something he called “hermetically sealed regulator markets.”

Speaking at the same conference, Minnesota House Majority Leader Ryan Winkler predicted that House Democrats would bring a bill before the 2020 Legislature and that it would likely pass the House. But the Senate, which is controlled by Republicans, would be unlikely to adopt the bill, Winkler said.

Still, he has held meetings around the state to gather information and begin drafting a bill that answers many of the concerns he’s heard from his caucus and in his travels. Many of those questions revolve around regulation and taxation, criminal justice, health implications, economic development and the concerns of veterans and tribal nations.

Winkler said making a lot of revenue for the state is not one of the motivations for a legalization push, instead saying taxation should pay for the regulation, law enforcement and ill effects caused by increased use of the drug.

“We are not interested in this as a major source of revenue for the state of Minnesota to deal with education or road construction, things like that,” Winkler said. “We know that there is a harm to cannabis. But the amount of harm that cannabis creates is far exceeded by the harm we are creating with our current approach to it. But that doesn’t mean that there isn’t a harm.”

If Barnes’ estimate is close to what Minnesota could capture — $297 million a year after five years of legalization — it would be less than half of the $650 million the state will collect this year from tobacco taxes.

Benefits overblown?

Chris Tholkes, acting director of the state Department of Health’s Office of Medical Cannabis, said her office is proceeding with the already legal production and sales but with an eye on how that would change should the state legalize recreational marijuana.

She said the state has about 18,000 active patients in its program and 1,600 health providers. Of those patients, nearly two-thirds are using the drug for intractable pain, one of 14 conditions that are covered by the program. The next most common conditions are post traumatic stress disorder, muscle spasms and the effects of cancer treatment.

MinnPost photo by Peter Callaghan
Minneapolis attorney Ross Hussey, far right, speaking about investing in marijuana businesses while other panelists listen. They are Kim Bemis of Smart Approaches to Marijuana, Laura Monn Ginsburg of Blunt Strategies, Chris Tholkes of the state Office of Medical Cannabis and state House Majority Leader Ryan Winkler.
Two additional conditions are being studied and could be added soon. They are chronic pain and age-related macular degeneration, Tholkes said. In states that have legalized recreational marijuana, participation levels in medical programs has dropped from 30 to 40 percent. 

She said some states have tried to keep their programs going by having lower taxation rates for medical (Minnesota doesn’t currently tax medical marijuana), letting approved patients grow their own supplies, or allowing higher THC levels for medical marijuana than for recreational. Minnesota could also consider allowing leaf marijuana to be used by patients who now are restricted to oils, tinctures and vaping.

Another speaker, Kim Beamis, introduced himself as the “Debbie Downer of the afternoon, or perhaps the canary in the coalmine,” given that he was talking at a conference conducted primarily by and for enthusiasts for legal marijuana.

Bemis is the state director for Smart Approaches to Marijuana, an organization that thinks states are rushing toward legalization without properly analyzing the ill effects and lack of research around recreational usage, especially involving teens.

“We have no research that says what 90 percent THC does to brains, especially teen brains,” Bemis said. While most recreational marijuana contains THC levels in the 13 to 15 percent range, there have been illicit vaping cartridges confiscated with the higher levels, he said.

Bemis said while polls show clear majorities supporting legalization, they are often overly simplistic, since they group pro-legalization respondents with pro-decriminalization respondents. SAM polls find that when respondents are given both options, only one-third support the type of commercialized legal markets that exist in states like Colorado, Washington, Oregon and soon Illinois.

Bemis also said the taxation benefits and impacts for farmers have been overblown. Bemis was booed by some in the audience for his points that legalizing marijuana is premature and that the national momentum behind it has slowed.

Comments (26)

  1. Submitted by lisa miller on 11/07/2019 - 10:34 am.

    All white people in that photo–as usual they make money off of it, while people of color tend to go to jail for the same thing. Legalizing invites even more problems–more youth and pregnant woman using it and yes there are some effects. De criminalize it but don’t legalize it and have it for medical purposes. Pushing it for taxes is not the way.

  2. Submitted by Connor OKeefe on 11/07/2019 - 10:48 am.

    “You have to make it competitive enough to compete with — and preferably end — illegal black markets, but not so uncontained that there is too much supply and no profits for businesses.”

    Lol. How about just legalizing it altogether. People that want it will grow it. There will be plenty enough people too baked to grow it themselves who will buy it, creating a little cottage industry.

    Why does everything have to feed the government, or corporate machine?

    • Submitted by Dan Landherr on 11/07/2019 - 04:13 pm.

      Without regulation and taxation how do we pay for the costs? For example, who makes sure the marijuana sold is actually marijuana and not some other drug? There are external costs associated with legal marijuana just like there are with tobacco and alcohol. Taxation helps cover those costs.

      • Submitted by Connor OKeefe on 11/07/2019 - 04:59 pm.

        “For example, who makes sure the marijuana sold is actually marijuana and not some other drug?“

        I’m pretty sure people who use marijuana know it when they see it.

        Ever been to the farmers market, left with a basket of great looking tomatoes only to find you got bananas? Me neither. Never saw a government agent protecting me from that scam either.

        • Submitted by Pat Terry on 11/07/2019 - 06:17 pm.

          I knew plenty of people who have inadvertently purchased very expensive oregano.

        • Submitted by Dan Landherr on 11/08/2019 - 12:51 pm.

          If you don’t think the government regulates food and drugs you must have never read a label on a juice container or a pill bottle. If Minnesota is going to legalize marijuana it will need to set up its own agency to ensure that items are not sold fraudulently since it cannot rely on the FDA.

          Your flippant remark indicates to me that you haven’t thought about this much. If the seller claims a certain % THC, how would the buyer be able to know this is true without sending a sample to a laboratory? If the seller puts in other chemicals that are unsafe (which has been happening in THC vape cartridges causing chemical burns) how would the buyer know? The current medical marijuana market in MN has standards on the product – you can read them if you would like: CHAPTER 4770, MEDICAL CANNABIS.

        • Submitted by Brian Gandt on 11/14/2019 - 04:34 pm.

          You obviously have not spent quality time on the drug scene. Lack of honesty abounds in it.

  3. Submitted by Constance Sullivan on 11/07/2019 - 02:00 pm.

    Boy! You get absolutely pro-legalized marijuana folks together with a guy some here say is biased the other way because he’s funded by alcohol and drug industries [one is so tired. . , !], and you get: a complete denial of the existence of a really negative experience in both California and Colorado with legalized pot! In this article, and maybe i this conference, not a single mention of California. Wow.

    Legal pot, with all the state-imposed restrictions (permits, licenses, inspections, etc, etc.) and taxes on end-users, does not bring in either a lot of new state funds, or ruination of the illegal pot industry. Au contraire! I can’t remember whether it was “60 Minutes” or a PBS report from several weeks ago that showed the problems.

    • Submitted by Pat Terry on 11/07/2019 - 03:26 pm.

      I’m not saying they are biased. I am saying they are monsters. Opioids kill tens of thousands of people in this country each year and have negatively impacted millions of lives. Legal marijuana is a safe alternative that threatens that billion dollar industry. They are killing people for profit.

      Is everything perfect in Colorado and other states? Of course not. But no one is talking about going back, because its a far better system now. Criminalizing marijuana began because of racism, and its enforcement has always been extremely racist. Time for that to end.

    • Submitted by Duncan Wallace on 11/07/2019 - 06:03 pm.

      Hancock, 5 other mayors want pot removed from federal illegal-drugs list
      June 11, 2018

      Mayors from six U.S. cities in states with legal marijuana — including Denver Mayor Michael Hancock — said Monday they have formed a coalition to push for federal marijuana policy reform just days after President Donald Trump expressed support for bipartisan congressional legislation to ease the federal ban on pot.

      Hancock as well as mayors from Seattle, Portland, San Francisco, Los Angeles, Las Vegas and West Sacramento — all in marijuana-friendly states — sponsored a resolution at the U.S. Conference of Mayors in Boston that asked the U.S. government to remove cannabis from a list of illegal drugs.

      It was approved unanimously by the broader gathering Monday, Larry Jones said, a spokesman for the conference.

      Thornton Mayor Heidi Williams wasn’t a sponsor but pledged to advocate for federal reforms.

      “As mayors of cities that have successfully implemented and managed this new industry, we have hands-on experience that can help Congress take the right steps to support other local governments as they prepare to enter this new frontier,” said Hancock, who led the coalition. “We all face common challenges.”

      Portland Mayor Ted Wheeler said marijuana businesses employ thousands of people and generate millions of dollars in Oregon.

      “Cannabis prohibition has failed. It has failed to keep our children safe, it has failed law enforcement, and it has especially failed communities of color disproportionately targeted and prosecuted for low-level drug offenses,” he said in an e-mail Monday.

      “Eventually, legalization will come to every state — and we want to make sure it’s done so safely and effectively.”


      • Submitted by Ronald Beaulieu on 12/20/2019 - 04:20 am.

        We know who opposes it and who does not. mayor’s of cities cannot change senators ideas or sell them a pitch as to why legalizing it fully will or will not benefit minnesota. But we should give this legalization thing a try,why not opiates are legal,alcohol is, kids can get alcohol any time as if weed is going to have some chemical put in it that will kill some one…..all I’m saying is give it a try maybe we might have extra jobs or something like that not a bad thing weeds never killed anyone so what do we have to lose? Republicans are scared because it will help minnesota.! big drug company’s say oh no we are going to lose money I say give it a go see what happens people. To be fair this post is not meant to contradict the opinion of the person s comment I wanted to Express my feelings and opinion on the subject.

  4. Submitted by Bob Alberti on 11/07/2019 - 04:18 pm.

    We shouldn’t be legalizing weed without 1) compensating the small businesspeople who have supported the business for decades, and 2) amnesty for every marijuana conviction.

    Because otherwise this is yet another example of colonization. When weed is illegal it’s used as a tool to oppress the disadvantaged. When suddenly the investor class starts seeing dollar signs, suddenly it’s guys in suits making millions off weed. The heck with that. No justice? No weed.

    • Submitted by Pat Terry on 11/07/2019 - 06:16 pm.

      I’m all in for Number 2. But Number 1 would be pretty difficult to verify, even if it was a good idea. Probably not a lot of business records being kept.

      Just let people grow their own – its pretty easy to so (so I’ve heard) and then you can cut out the guys in suits.

    • Submitted by Ronald Beaulieu on 12/20/2019 - 04:27 am.

      Why? learn how to grow then you can be rich.people who dont know something are scared or overthinking starts what matters is revenue. Jobs as well we haven’t even legalized it yet and probably wont so people with this kind negative views on legalization put the stop to it just try it on for size a while maybe it might work.

  5. Submitted by Connor OKeefe on 11/07/2019 - 04:55 pm.

    “We shouldn’t be legalizing weed without compensating the small businesspeople who have supported the business for decades”

    Lol! There’s your internet champ for this week, right there, ladies and gentlemen.

  6. Submitted by William Duncan on 11/08/2019 - 08:21 am.

    Cannabis prohibition has always been about this democratic Republic acting out it’s facisitic sub-conscious. Boot-on-neck, keep the poor in their place, politically and economically disenfranchise many black men and the black community, tie asset forfiture to police budgets therby making motive to hunt down small time growers.

    It is merely the most useful plant on the planet, easy to grow requiring few inputs. Therefore also the corn, wood pulp, plastics and pharma industries have had a vested interest in making certain this is not a free market.

    If Minnesotans truly believe in freedom, cannibis should be legal for any adult to grow for their own use, and for sale or barter or gift to friends and family. Licenses for commercial growing and selling should be treated like the craft beer industry.

    • Submitted by Ronald Beaulieu on 12/20/2019 - 04:35 am.

      Ya they think only the people who know how to grow are going to benefit.then profiling racially, I say legalize Republicans just stop trying to block every thing any Democrat wants to try.lets give this a real go,if it doesn’t work then make it illegal again geeze,now they are looking at how many people live in this state we wont be able to tax all of it,black market all that against legalizing. Me I’m ready to see it legal why not!!!

  7. Submitted by Jon Ruff on 11/08/2019 - 10:53 am.

    In my geezerhood I remain convinced that I’ll never see legal weed in Minnesota. Who needs it with an ever increasing supply of blackmarket product?
    The “anti” arguments are rife with ignorance ,and half-truths; including from the Strib. The recent widespread availabllity of the poisonous “THC” vaping cartridges as an example of why not to legalize is just plain backward. The blackmarket is drawn to the illegal states (MN), which is only going to get worse.Illinois is legalizing Jan !st; “loaded” gummiebears will be that much closer. More people are growing it, for themselves and for distribution, heck, you can even arrange purchase on Facebook.
    Colorado, as far as I’m concerned, is the only state that has done it right. A tightly regulated, and well organized market and an educated enforcement has not only protected the young, but they seem to have lost interest when the “grown-ups” do it legally.For us grown-ups it means lab testing for cleanliness and determined potency .
    Like the guy on the stool next to me pointed out the availability has never been stronger; who needs legal? Well, Ya, I guess.

    • Submitted by Dennis Wagner on 11/11/2019 - 07:59 pm.

      A little add on: Curious what the incidental saving a year would be in: Police work that doesn’t have to be done, court cases that don’t need to happen, defense attorneys that don’t need to be hired, prosecutes that don’t need to build cases, jail cells that don’t need to be filled, fines that don’t need to be paid, families that don’t need to go on public assistance or off to pay day lending becaseu a bread winner is no longer available. .

  8. Submitted by Paul Udstrand on 11/12/2019 - 09:03 am.

    I think what people keep hung up on is the fact that we can’t eliminate the risks associated with marijuana use. People seem to think if we can’t find a risk free solution we need to maintain the status-quo.

    The problem is we never eliminate risks entirely no matter what we do. Yes, some people will abuse marijuana, some people use machinery and equipment while “high”. Marijuana smoke isn’t a “safe” as some people think it is compared to cigarettes. etc. etc. etc. These risks can never be entirely eliminated any more than we guarantee that everyone buying and driving a car will never have an accident.

    When we sell cars we know that people will text and drink and drive. We know that drivers will speed and be reckless. We know drivers will kill pedestrians. We know that tens of thousands of people every year get killed and injured. Eliminating risk isn’t necessarily the primary test we use to decide what’s legal and what isn’t.

    Another problem with illegal substances like marijuana is that making and keeping it illegal isn’t a “risk free” policy; it’s not a question of moving from a risk free scenario to one full of risks. It’s not the status quo isn’t hurting anyone and current regime certainly isn’t “cost” free either.

    I look at the lives ruined in a variety of ways by the war on drugs, and toxic and corrosive effect on neighborhoods, communities, and people of color, and compare the cost of eliminating or reducing THOSE risks with risks associated with legalization or decriminalization.

    I look at the current state of affairs and I end up deciding that while legal marijuana won’t give us a perfect world, it gives a slightly less violent and more just and equitable world. Repealing prohibition didn’t create a perfect society, but it DID put a lot of gangsters our of business.

    The advantage to legalizing vs. decriminalizing is that legalization creates a regime of oversight and regulation. You can let people grow for their own use, but if you think NO ONE will grow big to sell you’re not paying attention to the nature of capitalism. Right now we have Park Rangers getting killed when the stumble into pot farms in National Parks… that doesn’t stop unless we let farmers grow pot legally.

    And yes, taxes are one way of recovering the costs associated with risky business. Tax revenue can be applied in part to mitigating the damage associated certain behaviors and transactions. If nothing else you use tax revenue to cover the cost of regulation and oversight. We could go a step further and imagine applying this tax revenue to a national health care plan to cover medical costs associated with abuse and accidents.

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