Should towns that ban pot dispensaries get the tax revenue?
Who should share in the spoils of the new recreational marijuana industry? If pro-pot advocates get their way, it won’t be any of the more than 100 municipalities that have enacted bans, moratoriums, or tight limits on licensed marijuana operations.
Proponents of legalized marijuana are planning to push the Legislature to block cities and towns with such restrictions from receiving a single dime of the $150 million-plus in tax revenue the state could soon collect from retail cannabis sales.
It’s a long-shot idea, but backers hope there’s appeal in its moral simplicity. Their argument amounts to the familiar parable of the Little Red Hen: Why should those who refused to help bake the bread get to eat it?
“Municipalities shouldn’t be entitled to something they took no part in,” said Kamani Jefferson, who runs the Mass. Recreational Consumer Council. The proposal, he explained, “would force their hand and really encourage them to let these businesses in.”
Currently, state law coaxes municipalities to welcome licensed marijuana firms by allowing them to levy a 3 percent tax on retail pot sales and also take a 3 percent cut of each marijuana company’s revenue. That’s the carrot.
But Jefferson and others say the mounting number of local restrictions — particularly in communities where voters last year approved Question 4, the ballot measure that legalized marijuana — is proof that a stick is needed, too.
So in January, they plan to introduce a bill that would reduce state payouts to cities and towns with bans and other restrictions on marijuana operations by an amount equivalent to what each community would get as its “share” of the state’s effective 17 percent tax on commercial pot.
Exactly how to determine that sum is just one of many formidable logistical and political obstacles the measure faces.
The Massachusetts Legislature has already twice rejected language that would have given a bigger chunk of state pot tax revenue to municipalities that welcome marijuana companies. Moreover, cities and towns wield considerable influence on Beacon Hill and fiercely fight for the state assistance they rely on to pave roads, build schools, and so on.
The executive director of the Massachusetts Municipal Association, which lobbies on behalf of local governments, panned the suggestion by the pro-marijuana group.
“This is punitive, wildly impractical, and impossible to implement,” Geoff Beckwith said. “The commercial marijuana law provides financial incentives for communities to zone for pot shops. Communities that decide not to are forgoing that incentive. That is the only reasonable and transparent way to shape tax policy.”
Noting that communities use state aid derived from the sales tax to build and maintain schools, Beckwith asked rhetorically, should a town not get money for classroom renovations because it refused a mall permission to open there?
“The answer is no,” he said.
And, Beckwith argued, even cities and towns that ban marijuana shops will need money to train police officers to spot stoned drivers and for other “spillover” costs related to legalization.
A somewhat similar debate has emerged over the fairness of payouts from the state Lottery, the single largest source of local aid in Massachusetts. A Globe analysis in 2014 found lower-income communities often had higher sales of lottery tickets than the local aid payments they received in return, while affluent communities commonly got far more money than they “paid in.” The town of Harvard, for example, did not have a single retailer selling lottery tickets, yet received far more in local aid funds than several larger, poorer communities nearby where tickets are available.
Despite the challenges, activists are pushing forward, partly out of a cathartic desire to strike back at the “prohibitionist” forces they believe were behind the Legislature’s changes to Question 4 and the subsequent string of community restrictions on cannabis sales.
“I’m not sure it’s workable, but I like the sentiment behind it,” said Jim Borghesani, a spokesman for the sponsors of Question 4. “Why should towns that vote to keep criminals in control of marijuana commerce and keep unsafe, untested product on the streets not experience repercussions?”
Or, as longtime Massachusetts legalization advocate Bill Downing called the proposed repercussions: “instant karma.”
One element everyone agrees on is that implementing the prohibition would be complex.
To start, municipalities receive state funds through numerous channels, including local aid from lottery proceeds and grants for specific projects. Which stream of money to target, and by how much, would need to be determined. Similarly, parsing pot taxes, a portion of which will be mingled in the same state fund that receives other sales tax collections, would be extremely difficult, according to Massachusetts financial officials.
And by law, marijuana excise tax revenues must fund the Cannabis Control Commission and other state agencies overseeing recreational pot. Leftover money goes to public health initiatives related to substance abuse, public safety, police training, and assistance to communities disproportionately impacted by high arrest and incarceration rates for marijuana before its legalization.
So, critics ask, should addiction recovery organizations and police departments in towns with dispensary bans really get short shrift?
In fact, that’s how it will work in California, where the state’s new recreational marijuana law withholds marijuana-tax-funded law enforcement and health grants from local governments that have banned commercial marijuana operations within their borders.
Marijuana data and investment firms ArcView Market Research and New Frontier have estimated recreational marijuana sales in Massachusetts would top $900 million in 2020, which would yield roughly $150 million annually in state tax revenue.
Other states with legal marijuana have also earmarked pot tax revenues. Colorado, for example, steers much of the tax proceeds from its marijuana industry — which last fiscal year totaled $223.5 million — to public education.