The chair of the Minnesota House committee with control of taxes had a message for education and social services advocates Thursday: Don’t expect recreational marijuana to raise money to enhance those programs.
Rep. Aisha Gomez, the Minneapolis DFLer who leads the House Taxes Committee, used the rollout of a massive recreational marijuana bill to say it won’t produce a bucket of cash for other programs.
“Cannabis taxes in our bill are not going to solve anyone’s social problems,” she said. “We’re not going to use taxes to fix the education changes that our communities need, to build all the affordable housing that we need, to fix all the infrastructure that we need.
“We designed this bill to address the wrongs of prohibition, to bring people out of the illicit market and into a regulated market, which means we try not to have a high tax on cannabis so it can compete.”
She dubbed her message a “scolding, tax-related, final note.”
At the same time, however, backers from both the House and Senate — DFLers all — predicted passage this year.
“I believe that 2023 is the year that we will legalize adult-use cannabis in Minnesota. That process starts today,” Rep. Zack Stephenson, DFL Coon Rapids, said Thursday. The bill, House File 100, will get its first hearing Jan. 11.
“Our current laws are doing more harm than good,” Stephenson said. “State and local governments are spending millions of dollars enforcing laws that aren’t helping anyone.”
Sen. Lindsey Port, the Burnsville DFLer who will be the lead sponsor in the Senate, said the bill that passed the House did not get a hearing in the GOP-controlled Senate. That will change this session, she said, but it also means the Senate has more work to do than the House to become familiar with the issues.
“We’ll take some time to educate our members and make sure we are able to build the same bipartisan support that has been built in the House,” she said. “The Senate is committed to making sure that we right this wrong.”
Gov. Tim Walz has endorsed legalization and says the affected state agencies have already begun preparing for it. Since Washington and Colorado legalized recreational marijuana by initiative in 2012, 19 other states, along with Washington, D.C. and Guam, have done so by ballot measure or by legislation.
[image_credit]National Conference of State Legislatures[/image_credit][image_caption]State regulated cannabis programs[/image_caption]
It also includes $5.5 million for the Department of Public Safety, $5 million for the State Patrol, $1 million to the courts and $8 million for substance abuse treatment.
That $100 million is about how much Gomez thinks the tax rate of 8 percent of gross receipts at the retail level will raise over the same time period. Regular sales taxes will also apply but local governments would be precluded from adding local sales taxes.
The bill is similar to the bill that passed the House in 2021 but has some changes, including fixes to the hemp-based edibles language that was included in a large omnibus bill last spring. That bill made intoxicating edibles, vapes and drinks legal and created a new and mostly unregulated and untaxed industry. The new bill brings that system into the recreational marijuana system under a new control board.
Backers of legal marijuana worry that if governments try to collect too much in taxes on marijuana products, they won’t be competitive with the entrenched black market that has existed for decades. The revenue from the bill might not even be enough to pay for the regulation, enforcement and economic development efforts contained in the measure. Among them are loan and training programs to help lower-income and people of color — historically the targets of laws prohibiting marijuana — become part of the new business.
In 2019, a legal marijuana market analyst told a Minneapolis conference on legalization that he estimated a $300 million tax take from recreational marijuana after five years. That was based on surveys of current marijuana usage and what the similarly sized state of Colorado raised. But even that level was less than half of what Minnesota raises in tobacco taxes.
At the same conference, then-House Majority Leader Ryan Winkler said the intent of legalization wasn’t to raise money. Winkler is credited with developing the substance of the bill that was introduced Thursday.
“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 then.
Gomez echoed that philosophy Thursday. The tax rate envisioned in the bill would collect between $100 million and $150 million over two years. But if that money isn’t enough to cover the programs in the bill, the House DFL is committed to using general fund revenue to make up for it.
“What our commitment is to the people of Minnesota is that we’re going to make sure that people are safe, that our law enforcement has the resources they need to respond to this, that regulators have the resources they need to respond to this, that we are being true to the values that we started our process with,”Gomez said. Those include making sure there are “pathways into this marketplace” for people who have been harmed by prohibition.
“Our commitment to the health and safety and equity that is encompassed here remains regardless of where that potentially volatile revenue stream lands,” she said.
A significant section of the bill responds to demands that those who had marijuana-related convictions before legalization have those records cleared. The bill provides automatic expungement for lower offenses and a new board to review requests for more-serious crimes.
“We heard loud and clear from Minnesotans that we cannot legalize cannabis without expungement,” said Sen. Clare Oumou Verbeten, DFL-St. Paul. “This is a racial justice issue.”
Opponents of legalization said earlier this week that passage was “less than a slam dunk” and that lawmakers have not addressed issues such as traffic safety, workplace safety and access by young people. The bill, though referred to as adult-use-cannabis, prohibits use by those who are 20 and younger.
“We’re going to unleash more impaired drivers on Minnesota roadways on an already understaffed law enforcement contingent without a reliable roadside test of impairment,” said John Hausladen, president and CEO of the Minnesota Trucking Association.
Kim Bemis, the c0-chair of Smart Approaches to Marijuana Minnesota, said legal marijuana bills in other states have not produced the revenue predicted and created more problems than proponents acknowledged. He said he was especially concerned about high-potency levels in commercial products and the impacts it has on users, particularly young people.
“One of the biggest myths about commercialization of cannabis is the idea that we will get rid of cartels and the black market,” Bemis said. That hasn’t happened in any of the other legalization states, he said.
Opponents said they were caught unaware when the hemp-based edibles law passed, as were many others. They thought they were going to spend 2023 trying to undo that law but instead will be fighting a larger battle against recreational marijuana. “The Legislature’s primary responsibility is that it passes laws that are safe and the benefits outweigh the costs,” Hausladen said, something that didn’t occur with the hemp bill last year.
It would be helpful if the revenue would just cover treatment for the mental and chemical illnesses that — for some users — have marijuana use in their case histories. It is very dismal to see us creating / legitimizing yet another industry privileged to dump its “externalities” (economic and social costs) on society as a whole. I would amend the proposed legislation to hold all persons and companies involved in cannabis, whether or not in compliance with the law, to assume full joint and several liability for all of the related social costs.
(Joint and several liability means you are on the hook for all of it, even if another dealer down the street is not paying its fair share.)
As to the inevitable question, and what about ___ business, shouldn’t they also be jointly and severally liable for their social costs? The answer in most cases is yes.
“I would amend the proposed legislation to hold all persons and companies involved in cannabis, whether or not in compliance with the law, to assume full joint and several liability for all of the related social costs.”
We need to do that for guns first, and maybe cars – both of which kill far more people every year than pot.
“We need to do that for guns first, and maybe cars – both of which kill far more people every year than pot.”
Yes, thank you Brian.
Do alcohol taxes pay for the heavy costs of alcohol on society? Hardly? How about tobacco taxes? While we are at it do auto and gas taxes cover total costs of getting people around by vehicle, not to mention its contribution to global warming and Middle Eastern wars. Back to marijuana police court and penal costs paid when we don’t tax it. Mostly be those who don’t use it or are not heavy users. Talking about marijuana v without bringing in all recreation drug use is misleading and shallow.
Do you have the facts on that? Alcohol taxes raise a bunch of money.
Colorado earned over $400 Million last year, while Illinois earned almost $600 Million from their pot taxes. That’s not peanuts.
Plus…we are surrounded by none pot states such as Iowa, North and South Dakota and Wisconsin…who will cross the border to buy pot.
Personally, I believe you’re massively minimizing its effect.
And the black markets are very active in those states so legal sales are less than they could be. And pay no attention to the driving and societal problems that are finally being recognized. But you are right in that the State should try and squeeze as much money out of the citizens as possible, finding the tipping point between maximum tax and black market dominance.
You’re correct that the black market still exists and that’s because you can buy it for less on the black market…BUT all those states have cut the pricing drastically so they can compete.
But…if I were buying pot today, I’d buy from a legal establishment because there are safety requirements and no one really knows what is in the black market products.
Then you talk about the govt squeezing every cent out of the people. You totally sound like a repub who’s calling for tax cuts, that as we’ve seen from repubs, goes almost exclusively to the 10%…not the 90%.
Personally, I’m neutral on legalization of recreational marijuana . But as reported, this bill seems insane – spends more than marijuana taxes would generate. And making up the difference from the general fund (taxes from us all)? Not even enough revenue in the bill to cover enforcement costs?
Sponsors want to keep a state tax on marijuana low (effectively to remain competitive with the black market).Having high tax rates never seemed to bother legislators before. Almost across the board, Minnesota taxes are among the highest in the nation. Total state-local tax burden 11th highest in the nation, according to the Tax Foundation; fourth highest corporate tax rate, fifth worse overall business tax climate. Other “sin” taxes: 11th highest on beer, 14th highest on alcohol, 10th highest cigarettes … no concerns about black market “competition” there.
Don, you did not respond to the main thrust of the legislation,…” address the wrongs of prohibition” How do you feel about that? The federal government has already moved to expunge records, so why not also do it at the state level? Your concern regarding other things being taxed is a little surprising. They weren’t always taxed at those levels in the past. We all know their impact on society has certainly not been healthy. Cigarettes alone have created a new movement of educating people to quit.
They mentioned the downside to high taxes in other states. Minnesota has learned quite a bit since 2012. Watching other states make mistakes seems to be the best way to approach this problem. If you read the bill, you will find it very comprehensive and incorporates many important structures that benefit the people of this state. What’s the real problem? Is it the stigma attached to cannabis?
Actually Don, MN is the 9th best state to do business.
https://www.cnbc.com/2022/07/13/americas-top-states-for-business-2022-the-full-rankings.html
We are also one of the top states for quality of life and education.
TX always gets good ratings for business but like most repub states they have the worst quality of life. In fact, the most crime is in repub states who also have the majority of worst k-12 educational systems and poverty, not to mention shortest life spans because repubs don’t care about affordable healthcare.
Gene, please explain Texas and Florida having a huge influx of new residents from other states (mainly Blue states). While you are explaining, why are New York and California hemorrhaging residents?
The reason the taxes are not going to schools and housing is the Law Makers in St. Paul have Minnesota tax payers on the hook to raise property taxes, use school levy gimmicks and use Federal money to pay for public schools. The pot of money is already unending, no immediate need for more and surely no proof more money equals better results in education.
Old people don’t like the cold, and for the next 10 years or so there’ll be a large cohort of old folks. Nature will do what it does, and those numbers will even out.
Nope Matt, I winter in a popular spot down south with favorable tax laws and great weather. I have seen more 50-55 year old couples buying down here in preparation of selling their businesses or getting ready to retire. Many are successful Minnesotans who have no interest in paying 10% of their business sale to the state. It is not just age driving these successful working folks out of high tax Blue states, it’s economics.
Business “climate” ratings do vary, according to the criteria used in the rating. Have looked at many over the years. Some that rate Minnesota higher include other considerations, like recreational facilities and access to culture and arts (arguably enhancing appeal for employees). And Minnesota does have a good reputation for workforce quality. Those that put more emphasis on taxation and regulation generally rate Minnesota in the lowest quartile.
The article is a bit misleading. There are already high costs to illegal marijuana use, especially resulting from incarceration. Currently, marijuana use results in NO tax income for the state. Thus, any revenue is more than we’re getting from an already large market (along with all the problems that arise from a large black market). Even better, although there might be a cost to regulating marijuana (and a temporary cost related to expungement activities), we already pay for enforcement so there’s really no increase in enforcement costs, AND we’ll save money on incarceration for marijuana-only offenders.
And marijuana is quite different from tobacco from the standpoint of whether there’s competition from a black market. Marijuana can be grown just about anywhere, so there’s a potentially huge supply that is unregulated (ever driven around on the rural back roads?). Not true of tobacco. And, if there’s any benefit to big tobacco, it’s that it is REALLY hard to farm tobacco without one of them getting a hold of you, which results in a market level regulation above and beyond legislative regulation. So, black market tobacco is low risk and legal tobacco can sustain a high tax rate. Also, unlike beer/alcohol (you can make your own beer for your own consumption without taxation, by the way), there’s not a lot of need to invest in equipment for black market weed production. It’s possible that the new legalized marijuana market can sustain a higher tax rate eventually, but I wouldn’t get too bent out of shape at 8% being too low (that’s on top of the regular sales tax rate of 6.875%). It’s higher than liquor tax rates in Minnesota, which is only 2.5% of gross receipts on top of the regular sales tax rate.
Thanks for the article. If marijuana taxes are raised too high people will just buy on the black market or grow their own like they do now.
There may be a little more capacity in the courts and jails since they no longer have to prosecute marijuana cases. This data shows about 100,000 marijuana cases over 5 years 2017-2021. That’s about 3% of the total.
https://www.mncourts.gov/Help-Topics/Court-Statistics/District-Court-Criminal-Charges-Data.aspx
So an insignificant number of cases.
The cost to society should be covered by the taxes.
I think the sales and tax return the state is forecasting is low.
Here in Montana, we just finished our first year with both recreational and medical, and combined they generated $300 million in sales, with nearly $46 million in taxes.
This is in a state with just 1 million people – although we do get a lot of tourists, but not that many.
Minnesota has 5 times the residents, it only makes sense the tax revenue will be far greater than projected.
Can’t believe this is actually happening! If u told me 20 or 30 years from now we will be moving towards a crack cocaine nation, I would’ve said what u talking’ about Willis? And u be doing the JJ dynamite!
I think the legacy of this move to legalize will be very negative 25 years from now, maybe sooner. I am disappointed that the Dems ( I’m a life-long Dem) are ignoring the health and addiction impacts which seemed to be supported by a huge amount of scientific and health research.
Nicotine is 3x more addictive than THC (the psychoactive component in cannabis) and is linked to far more medical problems than weed. We got some chump change resulting from tobacco companies lying about the health implications of cigarettes, but not enough to pay for any of them. And it’s still legal to produce, sell, and smoke/chew tobacco. I’m not sure why we should get upset now over something that’s unlikely to be nearly as problematic in the future. We should absolutely regulate it – I’m getting REALLY tired of getting skunked out in public places (and children shouldn’t be exposed to it…but then no one stops people from smoking cigarettes around kids) – but we don’t need to chicken little over all of this.
Some people, especially those in the addiction/recovery industry, simply cannot escape their prohibition models. It’s quite bizarre… they literally want to proceed as if prohibition actually “works”.
Well you’ll be wrong, not that you’ll be here to care. It’s generational, and thankfully, the generation who WILL be here to mind the store, is on board.
Many people will continue to buy it on the illegal market. The taxed product is too expensive.
How can anyone read this article and reach the conclusion that this will be a well thought out piece of legislation. If this is such a huge priority for the state why is it being managed like a failing business ?
Our politicians botched the edible legislation. Why should we expect anything different with cannabis. One would think if this is such a top priority for the state there would be more of a focus on revenue, costs , health and safety than fixing the wrongs of prohibition.
Botched? Has worked great for me. They even send coupons!
Yeah… and the private sector is responsible for the business models, not the government anyways.
Kind of a weird editorial decision regarding the title of this article. No one is actually making the claim that legalization will generate that level of revenue so I’m not sure how or why you generate that headline?
At best the taxes can be some useful revenue, but the most salient feature of this policy is to pot out of the realm of law enforcement.
The narrative promoted and understood by many is the legalization of cannabis would provide a tax revenue win fall to the state. This includes many Minn Post commenters who advocated for the tax benefits of legalization.
Based on the comments above, that’s not accurate. No one expected a tax windfall. They expected better regulation of an intoxicating substance and potentially reduced expenditures on both the judicial system and incarceration as a result of removing marijuana use from the naughty list. And MAYBE a few dollars more than the current zero dollars the state is getting in from marijuana sales now.
Sounds like our DFL trifecta doesn’t know what it’s talking about when it comes to tax revenue. Did you not read the article?
There’s plenty of issues being disregarded. The legalization of a substance where no levels of impairment or ability to test for while driving as a starter.
When your basis for legalization starts with equity and righting the wrongs of prohibition you should know you’re on the wrong path.
Jeff, anyone who reads my comments will tell you that I’m not the “go-to” guy for editing around here, but I can point out that titles and headlines are supposed to reflect the content of the material being introduced or presented; not some omnipresent narrative. This article is not a financial analysis of the possible tax revenue.
However, regarding the narrative you propose (i.e. it’s all about the tax revenue), I have to point out the fact that you’re mistaken. I’ve been around and involved long enough to say that possible tax revenue has always been and afterthought, not the primary consideration of this legalization. We only talk about the tax revenue AFTER discussing all the other reasons as in: ‘Besides… then we can tax it”.