As a mother of two young kids, I am skittish about legalizing marijuana in Massachusetts. But as a taxpayer, I am downright petrified.
Here’s why: The proponents of Question 4 portray legalizing weed as an economic boon that will create jobs and generate $100 million in tax revenue. It’s billed as a measure that will pay for itself — and then some.
But will it really? How solid are those revenue projections, and what about the costs? I’m not talking about the social costs of putting pot on the same legal footing as booze — which are nearly impossible to calculate — but the actual costs to set up a bureaucracy to regulate, inspect, and enforce the law if it passes.
And it will be a bureaucracy. It will have to keep tabs on hundreds of new pot shops that could open. Colorado, which in 2014 became the first state to legalize recreational use of marijuana, has 454 retail stores. Add in growers and edible manufacturers, the number balloons to more than 1,300 businesses.
That’s more than the number of Dunkin’ Donuts in Massachusetts.
If voters approve the ballot initiative, the beleaguered state budget will be further in the hole because lawmakers haven’t factored in startup costs to regulate marijuana. Because it is a new industry, it will likely be a while before businesses open their doors and the tax revenue rolls in. Look how long it took us to get eight medical marijuana dispensaries up and running.
So forget about fixing the T. Get used to overheated trains.
When the Legislature legalized gambling in 2011, it authorized $20.5 million from the rainy day fund to cover the costs of the Gaming Commission and other expenses related to enforcement. The gambling regulatory apparatus will eventually grow to 100 people to monitor one slots parlor and up to three resort casinos. The Gaming Commission paid back the state from casino licensing fees, but it took three years.
State Treasurer Deb Goldberg, whose office would oversee a Cannabis Control Commission established by the initiative, said that’s not happening again.
Proponents will tell you that everything will be just fine because Massachusetts will impose a 3.75 percent excise tax on marijuana sales, plus an option for cities and towns to tack on an additional 2 percent tax. That would be on top of the state’s 6.25 percent sales tax.
All told, marijuana products in Massachusetts face a tax as high as 12 percent, which sounds steep until you realize what other states have done. Colorado, for example, charges about 30 percent, which may explain why tax revenues more than cover the cost of its marijuana regulatory infrastructure.
Don’t count on that happening here. State Senator Jason Lewis has spent a year putting his Harvard MBA and McKinsey & Co. consulting background to good use as the chairman of the Special Senate Committee on Marijuana.
His take: The state will likely rack up tens of millions of dollars in direct costs to regulate marijuana and should only expect about $50 million a year in tax revenue. Monitoring the marijuana industry is incredibly complicated, even more so since the federal government deems it illegal. Here’s just one example of how unwieldy the weed business is: The state will likely have to be responsible for regulating pesticide use on plants, something that is normally done by the Environmental Protection Agency.
‘I don’t think it is a slam dunk the state will make money.’
Lewis estimates revenues will come in lower because, unlike other states, Massachusetts does not tax medical marijuana purchases, which make up a good portion of the proceeds. Plus, the ballot petition allows every adult to grow up to six marijuana plants at home, which can put a damper on commercial sales.
“This overall is a bad deal for taxpayers,” said Lewis, a Winchester Democrat who is voting against Question 4. “We almost certainly will not have any extra revenues to address other needs that our state has, whether it’s investing in schools, roads, bridges, or the MBTA. That’s probably the most important message. This is not an answer to solving our budget woes. Best case the revenues and licensing fees come close to covering all our direct costs, and they could possibly fall short.”
If that isn’t enough of a buzzkill for supporters of Question 4, then talk to Eileen McAnneny, president of the fiscal watchdog group Massachusetts Taxpayers Foundation. McAnneny’s group, along with the Greater Boston Chamber of Commerce, is opposing Question 4. I’ve never heard her so hopped up about an issue.
“The $100 million is kind of pulled out of thin air from proponents,” said McAnneny of how much tax revenue the state will see. “I don’t think it is a slam dunk the state will make money.”
Jim Borghesani, spokesman for the Yes on 4 Campaign, dismisses such concerns, saying opponents of legalizing pot everywhere always trot out these claims.
“Everything has been proven wrong,” he said. “Revenues have exceeded expectations.”
Now there are prominent supporters of Question 4, including the editorial board of the Globe. But even my esteemed colleagues point out the many flaws of this ballot proposal and advocate the Legislature make fixes such as raising the tax immediately.
That’s putting a lot of faith in our lawmakers, who couldn’t pass a tax on short-term rentals that even Airbnb wanted.
Democracy is messy, ballot petitions in particular. But Question 4 is an outright mess. Just vote “No.”