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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.

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