(The Center Square) – The state report recently released by Virginia Governor Ralph Northam on Legalizing Marijuana for Recreational Use calls for a tax rate high enough to meet revenue goals, but not high enough to encourage people to do so to turn to the black market.
The Effects of Legalizing the Sale and Personal Use of Marijuana on the CommonwealthThe bill, made by four state agencies, encourages lawmakers to consider a retail tax on marijuana that could be levied on different types of products at different levels.
“A tax rate should be high enough to cover the cost of the program, to reassure consumers that products are regulated and safe (e.g., adulterous free) to consume and to meet all other income goals to cover that Virginia has, “recommends the report. “However, the tax rate shouldn’t be high enough to encourage a flourishing illegal market.”
No specific level of taxation was recommended in the report, but revenue estimates based on different tax areas were provided. The revenue projections were based on data from states that have already legalized the sale and consumption of recreational marijuana. It is also estimated that the first year of legality will be fiscal year 2022.
According to the report, a 10% excise tax combined with sales tax would be expected to generate revenue of $ 35.4 million in the first year of implementation and $ 107.3 million in the third year. And in the fifth year, $ 140.1 million. A 25% excise tax would likely yield $ 69.4 million in the first year, $ 210.1 million in the third year, and $ 274.3 million in the fifth year.
The estimates do not take into account wholesale taxes, royalties, or other potential sources of income from the sale of marijuana.
ONE Report last month The Joint Legislative Audit and Review Commission estimates Virginia could receive up to $ 308 million in annual revenue from legal marijuana by the fifth year of implementation.
The Northam report advocated a “measured” approach to licensing. As this would be a new industry, the report recommended that the state limit the number of licenses it provided, but did not specify a specific number. If the market needs additional licenses, the state could issue them. The licensing process should be straightforward and fees shouldn’t be a barrier to entry.
Matt Simon, a senior legislative analyst for the Marijuana Policy Project, told The Center Square the report did a good job of discussing the guidelines implemented in other states, and encouraged lawmakers to base the guidelines on what has worked elsewhere.
“Virginia doesn’t have to reinvent the wheel,” said Simon.
In order to provide the state with the optimal tax revenue and deter people from taking advantage of the illegal market, Simon said the state should make sure the products are accessible to consumers. He said the law should ensure that the state provides enough licenses and avoid large fees that would prevent small businesses from competing. He also said lower taxes would help stamp out the illegal market, but consumers in other states have chosen to pay a higher price for the legal products because of their standards of convenience and safety. In the illegal market, people may not know the THC content of the product, they could get a moldy product or a product containing heavy metals.
Simon also advised the state against adopting an “opt-in” policy for local authorities to allow marijuana sales, as this sets the local standard as an ongoing marijuana ban and could block access to large areas of the Commonwealth . If the localities get control, an opt-out policy is better.
Earlier this year, Northam signed law decriminalizing the simple possession of marijuana, imposing a $ 25 fine for possession of small amounts. Marijuana legalization was backed by many Democrats but opposed by many Republicans.