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Balancing New State Adoption and Tax Revenue

Cannabis News & Events

Because the tax dollars generated by cannabis can be such a large push for more conservative states to adopt cannabis legalization programs - and while I believe in the benefits of cannabis, I am not above celebrating that potential tax dollars can help move conservative states forward - I wonder how the management of tax rates will continue to evolve.

For example, I appreciate the focus of some politicians and legislators (such as Phil Weiser of CO here) on how extremely high tax rates will inhibit the success of small business and lends to the "Big Tobacco" companies of the world overtaking the cannabis industry and decriminalization looms.

Thoughts out there on the balance of taxation as a tool for adoption vs a barrier to entry to cannabis advocates and small businesses?

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I appreciate your balanced considerations here, Coree! I'm in Vermont, where we're expecting to launch an adult-use market in 2022, with a combined 20% tax on cannabis. In my opinion and experience, tax revenue is a great tool for adaptation most of the time. Here in New England, I'd say it's 8 out of 10 times, but it doesn't ring true for those who still view cannabis as a "dangerous gateway drug" and the NIMBY audience. However, those recognizing the tax revenue as a benefit also want to see large enough figures to "justify" that argument. They're thinking about business, not accessibility.

Tax rates are often just a line item in projections, whether your business is big or small. I think the effect is just about equal on both, particularly when compared to the more troublesome barriers, such as the amount of startup capital needed in the first place. From the business operator's POV, a 5-10% difference in taxes might just mean adjusting their profitability timelines because customer counts decrease and shopping carts shrink (sometimes). Higher taxes definitely disadvantage a market, deterring consumers who might otherwise convert from growing their own cannabis or accessing through the illicit legacy market.

My biggest concern on this: if a state doesn't have a medical program, or that program is broken, medical access needs to be prioritized in the tax conversation and considerations. The higher the taxes, the higher that priority needs to be since it leaves the most at-need customers (patients) with no good options.

Hi Coree,

Benjamin wrote that he feels the balance of taxation would be just about equal on both sides of the argument, and to that I would agree yet also say the burden seems largely a matter of perspective. The perspective-phrase can sound like a cop-out sometimes for not taking a hard stance, but, these developments are so new and eager to change that anyone who is willing to take the risk of investment should ultimately feel super grateful to have taken the plunge. Does a number anywhere near 20% sound too harsh for a first-time retail entrepreneur, perhaps, but, experience is the best teacher they say; the business owner wants to grow within this new 'game' of finance but there must always be growing pains -- in this case by way of seemingly too high of a tax for entry.

These conservative states are dipping their toes in this water via the same methodologies with tobacco and alcohol; how could anyone 'blame' them in this regard when the industry has lots of elusive research to hang any tried and tested financial obligations on. Fear of the future is anxiety and this plant reduces that, paradoxically by making you think of a brighter said-future. With that said, most of the disgruntled rumblings (by way of barrier to entry) is a natural by-product of capitalistic thinking. In other words, this is a normal part of charting unknown waters, probably how the political landscape feels about a new gold rush in any part of the world. Who will bring more innovation and positive growth to the forefront, whereby talks of large scale control mean just as much to the local liquor store owner in this day and age. That is the singular most solemn Q & A a future entrepreneur should embrace.

Best regards

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