BOSTON — The state could not be accused of being “Taxachusetts,” at least when it comes to taxing Massachusetts marijuana, if Question 4 on the November ballot passes.
The proposal to legalize small amounts of recreational marijuana for adults calls for a tax rate on pot sales that would be lower — considerably lower in some cases — than states that have previously legalized the drug. Critics argue the tax structure envisioned may not generate enough revenue to cover the regulatory and enforcement costs associated with marijuana legalization.
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Question 4 calls for a 3.75 percent excise tax on retail recreational marijuana sales — assessed on top of the state’s regular 6.25 percent sales tax — effectively creating a 10 percent tax for consumers. Cities and towns would have the option of assessing an additional tax of up 2 percent on sales within their communities.
By contrast, Colorado currently imposes a 10 percent sales tax on marijuana products on top of the state’s normal 2.9 percent sales tax, along with a 15 percent excise tax on wholesale prices and local sales taxes (3.5 percent in the city of Denver).
Washington has a 37 percent excise tax on marijuana sales, while Oregon assesses a 25 percent excise tax with local communities allowed to tack on another 2 percent.
“We want the tax to be low enough to be able to fund the regulation and the administration of the initiative, but also to undercut the illicit market,” said Jim Borghesani, a spokesman for Campaign to Regulate Marijuana Like Alcohol, the group sponsoring the Massachusetts ballot question.
By keeping taxes low, more users will opt to buy pot from legal distributors instead of the black market, Borghesani argued. He also noted that Colorado and Oregon have recently moved to lower marijuana taxes: Colorado’s sales tax will drop to 8 percent next year while Oregon’s excise tax is scheduled to go to 17 percent.
State Sen. Jason Lewis is among those who believe the proposed tax rate in Massachusetts is too low.
“Any claims that this ballot question would be a revenue generator for the Commonwealth would be fool’s gold. It’s fool’s gold because at this tax rate it may not even cover the full cost of regulating the industry,” said the Winchester Democrat, who led a delegation of state senators that visited Colorado in January to study the impacts of legal marijuana. Lewis later announced his opposition to the ballot initiative and is on the steering committee of the anti-legalization group Campaign for a Safe and Healthy Massachusetts.
The Special Senate Committee on Marijuana has suggested a marijuana-specific sales tax from 10 percent to 20 percent, an excise tax on marijuana growers of between 5 and 15 percent, and a local options tax of up to 5 percent.
Opponents of the ballot question are exaggerating what it would cost to fund the Cannabis Control Commission, which under the proposal would oversee regulation of recreational pot, Borghesani said.
Beau Kilmer, co-director of the RAND Drug Policy Research Center, said marijuana tax policy is still evolving as more states weigh legalization, and it’s difficult to project how sales and revenue will play out.
States should also carefully consider how the drug itself should be taxed, he said, with options including sales price, weight or even concentration of THC, the psychoactive chemical in marijuana.
“If this passes in Massachusetts, the Legislature is going to want to have some serious discussion about marijuana taxes as soon as possible,” said Kilmer, who has advised other states on issues surrounding legalization but takes no position on Question 4. “They are going to want to think through what they want the taxes to be now and also begin to think about what the taxes might look like over time.”
Framers of the ballot initiative appear to have recognized this possibility, as Question 4, if approved, would allow the Cannabis Control Commission to review taxes on an annual basis and if needed make recommendations to the Legislature for change. But raising taxes once the law is in place could be a politically daunting task, Lewis contends.