If marijuana is legalized, the tax rate could get higher
Creating a potential quandary for the no-new-taxes administration of Governor Charlie Baker, Massachusetts’ top two Democratic lawmakers said Monday they are open to raising taxes on marijuana, should voters pass a ballot question to legalize the drug next month.
And Republican Lieutenant Governor Karyn Polito — standing in for Baker, who was out of state — criticized the 3.75 percent tax on marijuana embedded in the referendum as likely inadequate to cover oversight costs of the new industry.
Polito, who opposes legalization, did not directly answer questions about whether the administration would be open to raising the tax, nor whether such a move would violate its no-new-taxes promise.
But after meeting with Senate President Stanley C. Rosenberg and House Speaker Robert A. DeLeo, Polito told reporters: “This is a new industry. And compared to other states like Colorado, the question, in our view, is flawed because it has a tax rate that, in our view, most likely would not cover the costs to regulate the industry.”
Rosenberg, who supports legalization, said “yes, I would” be open to raising the tax beyond what’s in the ballot question. He said he’s not convinced that the rate in the proposed law is enough to fund enforcement and regulation of the new industry, as well as addiction treatment, and public health and safety concerns.
DeLeo, who along with Polito and Baker strongly opposes legalization, said “sure” he was open to raising the tax. “Should the voters decide on passing it, everything and anything would be on the board in terms of whether it’s taxation, whether it’s regulation,” he said.
The Massachusetts measure would create a 3.75 percent tax and give cities and towns the option to add an additional 2 percent tax on sales. That would be in addition to the state’s 6.25 percent sales tax. But the marijuana levy would be much lower than in other states where voters have legalized the drug. Washington State imposes a 37 percent tax on pot, for example.
Massachusetts low-tax advocates were displeased with top policy makers’ stance.
“This adds whole new meaning to the comment that taxes are too high,” said Chip Faulkner, communications director for the Marblehead-based Citizens for Limited Taxation, saying he opposed the prospect of raising a tax that has not even been put in place.
He said it’s premature for politicians to be guessing how much revenue marijuana legalization would bring in, should voters pass it.
“Nitpicking us to death is what they’re doing with that,” he said. “It’s killing us with a thousand cuts — hitting you here, hitting you there. We’ve got enough fees and taxes in this state.”
And Jim Borghesani, the chief spokesman for the pro-legalization YES on 4 campaign, said when it comes to the measure, “anybody who suggests that there won’t be sufficient revenue to cover expenses is flat out wrong.”
Proponents estimate the tax would bring in $100 million of state tax revenue in 2020. They say the rate is meant to be low enough to quickly snuff out the black market. Higher taxes, they argue, would encourage people to keep buying from dealers on the unregulated market.
A special Senate committee led by Senator Jason M. Lewis, an opponent of legalization, estimated Massachusetts would collect “$50-60 million in total annual marijuana taxes and fees within the first few years of legal recreational marijuana sales.”
Baker, during his 2014 campaign for governor, said he would not raise taxes or fees.
“I’m not gonna raise taxes,” he said in one debate with Democrat Martha Coakley.
“I’m not going to raise fees,” he said in another. He has not always lived up to that pledge, signing a small fee increase into his first budget in 2015.
Baker has said enacting levies on a “new service” that the government has never done before would not be breaking his pledge. For example, he signed into law a 20-cent per-ride fee on ride-hailing services such as Uber and Lyft as part of a bill regulating the industry.
Question 4 would eliminate penalties for possessing, using, or purchasing marijuana starting Dec. 15 and would allow recreational shops to open in 2018. It would create a Cannabis Control Commission charged with overseeing the new industry and making regulations to protect public health and safety.
In 2008, Massachusetts voters decriminalized marijuana, replacing the criminal penalties for possession of one ounce or less with a new system of civil penalties. In 2012, voters legalized marijuana for medical use.