Senate panel passes 25 percent tax on pot | VTDigger
 

Senate panel passes 25 percent tax on pot

Tim Ashe

Sen. Tim Ashe, D/P-Chittenden County, chair of Senate Finance. Photo by Erin Mansfield/VTDigger

A Senate panel on Friday approved tax provisions for a marijuana legalization bill.

The Senate Finance Committee placed a 25 percent excise tax on the sale of marijuana. The tax, which would function like a sales tax, would be applied to retail sales of the drug. Tax receipts would go into a special marijuana fund; sales taxes are typically funneled into the education and general funds.

The legislation legalizes marijuana effective January 2, 2018. In the first six months of the fiscal year, a 25 percent tax would generate between $5.6 million and $8.7 million, according to estimates from the Joint Fiscal Office.

The tax would raise between $13.4 million and $20.8 million in 2019, the first full year the law would be in effect, according to Sara Teachout, a financial analyst for JFO.

The Shumlin administration estimates the cost to regulate the legalized sale of pot would be $2.2 million.

The estimates are lower than projections from a Rand study, which pegged tax revenues between $20 million and $75 million. That’s because Rand estimated the state would benefit from pot tourism; JFO used more conservative state estimates for the number of people from out of state who would purchase marijuana in Vermont.

Senate Finance also set up a licensing fee structure for retail sales outlets for the drug of $15,000 to $25,000. More than a dozen other administrative fees range from $100 to $1,000.

The legislation does not allow the sale of homegrown pot, nor does it allow edibles.

Nonprofit medical dispensaries that now are the only legal outlets for the purchase marijuana would be allowed to become for profit entities and would be the only source of certain pot products, including tinctures and edibles.

The committee voted 6-1 to approve S.241. The bill will now head to the Senate Appropriations Committee, which has jurisdiction over how revenue from marijuana taxes and fees will be distributed across state government.

Sen. Kevin Mullin, R-Rutland, was the only no vote in the committee. He expressed several concerns, including whether the proposed law would set up a closed market to benefit a few wealthy people.

Kevin Mullin

Sen. Kevin Mullin, R-Rutland. Photo by Erin Mansfield/VTDigger

The Department of Public Safety, which also houses the Vermont State Police, would begin issuing a limited number of licenses to up to 30 applicants in the spring and summer of 2017. Licensees could start selling Jan. 2, 2018, and the department could decide to approve more dispensaries through 2019.

No credit card sales, different prices for out-of-state purchasers

Charles “Chuck” Karparis, the senior vice president of lending at the Vermont State Employees Credit Union, testified Thursday. He signaled that VSECU may be the only banking institution in the state that would allow marijuana dispensaries to open checking and savings accounts.

“We do currently offer those accounts to Vermont’s medical marijuana dispensaries,” Kaparis said. “We’re really looking to see what the final law is to determine to what extent we can provide those services.”

Sen. Tim Ashe, D/P-Chittenden, asked how the state could avoid having dispensary owners showing up at the tax department with huge canvas bags full of cash. Kaparis replied: “We’re trying to make it so that if (marijuana) does become legal in the state of Vermont that we can provide financial services so that things like that don’t happen.”

Customers would still not be able to pay for marijuana with a credit card. However, members of VSECU would be able to write checks to the dispensary just like any other business. Dispensary owners could also pay any applicable taxes by check.

The committee decided 5-2 in a straw vote that it was best to legalize marijuana in steps rather than all at once. Ashe, who agreed with the rest of the committee, described the measure in football terms as a “first down strategy” for legalization as opposed to gunning for a “100-yard return.”

The committee passed an amendment 4-3 that prohibits dispensaries from selling non-marijuana products in a bundle with marijuana. Sen. Michael Sirotkin, D-Chittenden, presented the amendment, saying he did not want dispensaries to sell $50 t-shirts that come with a handful of free joints.

The committee rejected an amendment that would have allowed dispensaries to sell the same amount of marijuana to Vermonters and out-of-staters. The limit will be a half-ounce for Vermont residents and a quarter-ounce for out-of-staters.

By comparison, Colorado has a one-ounce limit for residents and a quarter-ounce limit for nonresidents. Washington has no residency limits on how much a person can buy.

Sen. Richard Westman, R-Lamoille, said it’s important to keep the limit as low as possible when marijuana is first legalized. “If you put an ounce (into the bill), you’re never going to put the genie back in the bottle to go lower,” he said.

Mullin said there was nothing to stop tourists from asking a Vermonter to walk in and buy the larger amount of marijuana for them.

The cost of pot legalization

The administration projects that the total cost of legalizing pot in the next fiscal year would be $2.21 million across the departments of Public Safety, Health, Tax and Agriculture, according to Finance and Management Commissioner Andy Pallito.

The largest share, $920,000, would go to the Tax Department to fund two positions and to build an IT system to implement the excise tax model. $500,000 is slated for the Health Department to fund education and prevention efforts, and $230,000 would go to the Department of Agriculture. Public Safety would get $470,000 to cover drug recognition training for police officers, the rule-making process, and lab equipment.

Financing for the implementation raised eyebrows in the Senate Appropriations committee. Pallito said the state would fund the initial $2.21 million investment with the anticipation of money coming in at the end of FY17 and in FY18.

The administration doesn’t have a clear picture of the total expenses in the following years, but based on preliminary reports from a wide range of agencies, Pallito said he expects the annual tab will be between $10 million and $12 million.

Sen. John Campbell said that the Senate is giving the bill a “fair shake.” The bill is still on track to work its way through the Senate before lawmakers break for Town Meeting Day, he said.

The Senate Transportation, Economic Development and Agriculture Committees are still planning to weigh in on the legislation, Campbell said.

The bill also still needs to clear Appropriations, which, Campbell said, “will be its biggest challenge.”

Editor’s note: This story was updated 9:22 a.m. Feb. 14 with additional information about the cost of regulating marijuana.

Anne Galloway

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47 Comments on "Senate panel passes 25 percent tax on pot"

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Wendy Wilton
6 months 16 days ago

Why would a marijuana user buy the legal stuff with the high taxes if they can buy it more cheaply in the illegal market? Colorado’s experience is that the illegal market did not disappear with legalization.

Glenn Thompson
6 months 14 days ago

This article backs up Wendy’s point! Given the number of ‘thumbs down’ people have received in opposition to legalizing pot….I can only assume…nobody really cares that the country is experiencing a drug usage epidemic? The solution, lets encourage its usage and ignore the consequences.

“If you think Colorado’s legalization of marijuana retail sales killed the black market, think again.”

http://www.cnbcprime.com/marijuana/video/pot-after-hours-the-black-market/

Lets throw a local article in there also. Perhaps it will double my thumbs down rating!

http://rutlandherald.com/article/20160211/OPINION04/160219906

Mary Daly
6 months 16 days ago

So a 25% excise tax! What sane marijuana user will stop growing their little stash in the woods somewhere so they can pay a 25% tax on someone else’s? The 25 new police officers? We’ll have to buy them 25 ATV’s to do their surveillance. Even then, who thinks they can find it all? This whole thing is such a BAD idea and such a waste of time.

Keith Stern
6 months 16 days ago

I hope they have a plan ready for the increase in homelessness that Colorado has now.

fred moss
6 months 14 days ago

Keith

There is one thing Montpelier shines at; moving forward full steam with NO plan. Rest assured, that is the case here.

Brian Scott
6 months 13 days ago

Don’t know why you are getting so many down votes for this. Homelessness is increasing in Vermont and it’s likely that we’ll see some migration of the homeless from Boston and NYC with legalization. It’ll be a good time to own a hotel/motel since they’ll be packed full every night the temperatures drop courtesy of the state…

Neil Johnson
6 months 16 days ago
OH Joy! We are going to be the biggest drug dealers on the east coast! Yeah! Thank you Senator Kevin Mullin for being the only one to Vote No! Our state will soon have complete monopolies on Alcohol, Cigarettes, Marijuana, Gambling, Education, Healthcare (Doctors/Insurance and Drugs)….. If they have their way all fuels by a carbon tax! They are working on complete control of our property via zoning restrictions, in my town there is no commercial use by right, have to ask special permission from those in power……notice all the monopolies are very expensive. That’s the power and sole purpose… Read more »
Tom Sullivan
6 months 16 days ago

Being an opponent of legalization, I think a 25% tax is great!

You just knew that the progressives were unable to resist the urge to slap a hefty tax on marijuana and begin planning how to spend all of that projected revenue. It might already be spent.

But, all its going to take is a new president this November who doesn’t agree with legalization, in which case he (or she) will pull the plug on legalization and enforce federal law, and all of this effort will be wasted time paid for by VT taxpayers. Well done.

Gilbert W. Chapman
6 months 16 days ago
This whole ‘affair’ is another example of how Liberals abuse the poor in order to increase tax revenue for Montpelier to waste ~ Example One ~ The Lottery is the most regressive tax known to Mankind . . . The poor not only buy more lottery taxes than the rich and the semi-rich, but the cost for each ticket takes a larger percentage of their incomes . . . Example Two ~ Taxes on beer/liquor . . . If an Elite guy buys a six pack every day, it’s a much lower percentage of his income than the what the… Read more »
Roberta Barone
6 months 16 days ago

Why would people buy legal marijuana with a 25% tax, when they can buy it illegally for less? This legislation just encourages black market sales.

timothy price
6 months 16 days ago

What other commodities are sold in Vermont that endure a 25% tax? Other than deparating and greed, why is this tax being put into law? There are good laws that we should obey, and there are bad laws that must not be. (paraphrase Martin L. King.)

6 months 14 days ago

Timothy: the tax on “spiritous liquor” is 25%. That is one reason senators decided on that particular rate.

6 months 14 days ago

Usury is tagged at 20%. May be the reason so many Eastern Vermonters go to NH to buy alcohol.

Gilbert W. Chapman
6 months 12 days ago

Great ‘Comment’ Mr.Veitch . . . When I lived in White River Junction, I would simply cross the river and purchase liquor there . . . Then . . . after moving to Chittenden County . . . I’d buy a bottle or two on the way TO and back from Cape Cod . . . Massachusetts is even worse with taxes on liquor.

Santina Huskey
6 months 16 days ago
The way this Bill is written there is no benefit to the average Vermonter. Marijuana is already decriminalized in Vermont and Medical Marijuana is already legal. In their Bill Homegrown is illegal so there will be an increased crack down and fee’s for those who have been growing their own. Those residents currently paying nothing will be paying state prices plus 25% tax . Distribution will be limited to 30 high level grow operations (any organic farmers in the state house applying?) eliminating small level growers. The initial pitch was for mid level growers who would be able to have… Read more »
Bob Orleck
6 months 14 days ago

Totally agree with you except your last two paragraphs. Just leave it the way it is. We do not need to legalize it and for sure we don’t need to have stores selling it. You are point on with the rest of your comments.

Judith McLaughlin
6 months 16 days ago
…”In the first six months of the fiscal year, a 25 percent tax would generate between $5.6 million and $8.7 million, according to estimates from the Joint Fiscal Office……JFO used more conservative state estimates for the number of people from out of state who would purchase marijuana in Vermont.” Montpelier has never……and I mean never…successfully forecast a correct estimate for a new tax. It’s been estimated that 80,000 Vermonters are pot smokers. We really don’t know who is willing to drive here just to pick up a small amount. So, the real question is, how many of the current pot… Read more »
Justin Turco
6 months 15 days ago
All that tax revenue! Wow. Sure hope that’s not why we are doing this! Because you know who we are going to collect that tax revenue from? I’ll tell you who. We are going to collect it, to a very large degree, from the very people who already rely on one type of government assistance or another. Legalizing dope will only further degrade the quality of life for the people who are already most at risk. Want to increase the divide between the haves and have nots? This is how you do it. Also, there is no way you will… Read more »
Chuck Shannon
6 months 15 days ago

The final nail in the coffin in Vermont.

Mark Milazzo
6 months 15 days ago

I just wish the Legislators could put as much energy into reducing Vermont’s property tax that they put into this issue.

Ed Gomeau
6 months 14 days ago
I have not heard one logical reason why Vermont needed this legislation. It’s incredulous that the Legislature could devote multiple committees, regional hearings, staff time, paid consultant reports and who knows what else to this boondoggle. I have lived in Vermont four years but have never seen a Legislature so out of touch with reality as Vermont. Let’s not address real issues, excessive state and local taxes, a broken, outdated, antiquated education funding system, economic development (lack of) young people abandoning the state for saner locations. No, let’s spend our time on meaningless, self indulgent legislation that has significant ancillary… Read more »
Brian Kelly
6 months 15 days ago
The most important reason to legalize marijuana is to stop criminalizing citizens over it. Would you rather legally be able to posses marijuana and have the option of buying it with the overly expensive %25 tax with the option to continue to get it the same way you have always done while it was illegal until they lower the taxes… Or would you prefer to keep criminalizing marijuana consumers? During the marijuana legalization process, the black market is a form of checks and balances and is a good thing because people continuing to purchase off the black market it protest… Read more »
Jim Brochhhausen
6 months 14 days ago

The criminalizing of citizens is a false arguement. It is decriminalized in VT. Can you tell me anyone, in the last two years, who has had criminal charges brought against them for possesing small recreational amounts of pot?

The tax issue – Can you also name any significant tax in VT, that has been lowered in the last 6 years?

John Greenberg
6 months 14 days ago

Vermont income tax rates were lowered in 2009 and again in 2010. http://www.leg.state.vt.us/jfo/publications/2015%20Fiscal%20Facts.pdf, p. 44 of pdf

Glenn Thompson
6 months 14 days ago

And on the other side of the coin….we have this!

“After two long days of heated debate on the floor, representatives passed a budget bill Friday. The measure would raise residential and commercial rates by 4 and 5 percent respectively. It will be the fourth straight year of tax hikes if the Senate accepts the House version.”

http://www.wcax.com/story/25165273/vermont-house-passes-school-tax-increases

http://watchdog.org/226770/property-taxes-causing-outmigration/

Anyone who manages their own family budgets and owns property in Vermont knows whatever small decreases in income taxes is more than offset by increases in Property taxes, other taxes, and increases in about every fee imaginable. John, you are always defending the indefensible.

edward letourneau
6 months 14 days ago

“….keep criminalizing marijuana.” Anyone who thinks using pot is criminal in vermont is smoking too much of it!

John Grady
6 months 15 days ago
“The tax would raise between $13.4 million and $20.8 million in 2019, the first full year the law would be in effect, according to Sara Teachout, a financial analyst for JFO.” I’m not up on the details and sit here wondering why wouldn’t the state grow the weed and make tons of money by distributing it threw the existing Vermont State Liquor Stores ? Set up a state run grow operation. 2 years to do something that should take 2 months is another example of the ability of the people running things in this state who think nothing of giving… Read more »
6 months 14 days ago

Setting aside the question of whether or not this is a good idea, most legal scholars agree that state cultivation of cannabis would be pre-empted by federal law. However, as long as the state is merely issuing licenses, there is no direct conflict.

6 months 14 days ago

Supporting statewide regulated home grown with this bill would boost local economies and help average Vermonters pay their property taxes, buy their firewood, make their own medicinals, and encourage Vermonters to all be part of this multi million dollar windfall-instead S.241 gives the anointed few the licenses to grow in a virtual monopoly-and with the tax revenue going to boost the law enforcement to bust the local Vermont home growers thereby protecting the gifted license holders. As currently written, and just passed by the Finance Committee, S.241 will be a disaster for the 99% of Vermonters.

Tom Sullivan
6 months 13 days ago

“Supporting statewide regulated home grown with this bill would boost local economies and help average Vermonters pay their property taxes, buy their firewood”

How? To grow your own and sell it while avoiding paying any taxes? Nice.

6 months 14 days ago

Looks like most of the written comments on the 25% tax and the marijuana issue are solidly negative.

On the other hand, it seems that the pro-marijuana folks are unable to present any written responses to rationally defend the marijuana policy and thus are reduced to anonymously hitting the thumbs down button on the comments presented.

Its probably safe to say that when the marijuana policy blows up in future, these same anonymous thumbs down pushers will want to remain anonymous.

Paul Lorenzini
6 months 14 days ago

Blow’s up in the form of promised pensions, is that what you meant Pete?

Bob Orleck
6 months 14 days ago

Excellent observation Peter. I have had many exchanges with the pro-marijuana folks and they cannot intelligently discuss the dangers associated with this legislation. You said a lot here with a few words. Thanks again.

pat mcdonald
6 months 14 days ago
Here is what the bill says will happen to the revenue collected by S.241: Revenue generated by this act shall be allotted in the following formula: (A) 25 percent to prevention of substance abuse; (B) 25 percent to treatment of substance abuse; (C) 25 percent to criminal justice efforts to combat the illegal drug trade and impaired driving; and (D) 25 percent to the General Fund for the implementation, administration, and enforcement of this act with any remaining funds allocated equally among subdivisions (A)–(C) of this subdivision (6). To date I haven’t heard specifics about what this money will be… Read more »
Bob Orleck
6 months 14 days ago
Pat, the formula is a smokescreen to deflect criticism of the legislation and to fool people. If people would only think about it for a minute they could see the insanity of it all in setting up stores to sell marijuana to collect 25% on the sales so they can prevent people from using it. Now really, does that make any sense? The same silliness exists for the rest of the spending smokescreen. Sell it to them to use and with the tax money help treat them! Boy that is logical. For sure it will increase the number of people… Read more »
Jon Corrigan
6 months 14 days ago

Vermont’s ‘Department of Public Safety’ should be re-named. It’s a political office with absolutely no regard for the public, and even less for safety.

Bob Orleck
6 months 14 days ago
To the editor: I submitted this comment the Saturday morning the article appeared. I cannot understand why this was not published. It is all fair comment and does not violate your policy the way I read it. Here it is again just in case you did not get it. [email protected] The quotes below are from the article. “The Senate Finance Committee placed a 25 percent excise tax on the sale of marijuana. The tax, which would function like a sales tax, would be applied to retail sales of the drug.” This tax is what it is all about and not… Read more »
Rick Veitch
6 months 14 days ago
The current bill racing through the senate, S.241, creates a state regulated monopoly that brands anyone growing marijuana who not rich enough to get one of the few licenses, a criminal. Since right now a large percentage of the $225 million dollar illicit market comes directly from those grown cultivators, S.241 will legislate an unprecedented transfer of wealth out of our local communities and into the hands of a few. The bill carves out $1.5 million from the general fund, 25% of all revenue and 50% of all seizures for the state police, at least some of which will go… Read more »
Gilbert W. Chapman
6 months 14 days ago

Interesting . . . Yesterday afternoon there were numerous thumbs ‘ UP ‘ for the Comments reflecting ‘ Conservative ‘ views . . . Where Oh Where did all of those liberal, grass smoking hippies come from ? ? ?

michael olcott
6 months 14 days ago

they came from the houses of your neighbors,coworkers,the homes of the people who provide you with goods and services everyday.In short they are the everyday people of VT and you and your prohibitionist friends are in for a huge shock when they are allowed to step into the light after this is passed..

Chuck Shannon
6 months 14 days ago

Vermont is trying to tax the air we breathe. Our leaders aren’t good at sticking to budgets or living within their needs. Whatever money generated from these taxes with be shared with crooked “Non Profits”. Due to the addiction problem I am against legal pot. We have to fix that before we do this. Our kids are hurting enough now.

Gary Murdock
6 months 14 days ago

This bill should include the following provision: Any state employee and elected official must wait a minimum of 5 years after leaving state government before having any involvement in this industry. Are you reading this Senator Zuckerman?

Paul Richards
6 months 14 days ago

In terms of increased revenue and the overall wellbeing of our society this will eventually be a huge net loss if this gets approved. Pot is already decriminalized. Nothing good will come of legalizing pot.

Mike Ferzoco
6 months 13 days ago

I have yet to hear 1 coherent argument why pot should not be legalized. Those against freedom say wait, wait wait, and- don’t we have better things to discuss? Those that want it legalized cry about taxation. Did you think the state is going to hand it out? This is an issue that needs to be dealt with now. Ending this facet of the war on drugs will allow the state to tackle the opiate crisis. I f the tax is so horrible, address it AFTER giving it a try.
There’s gotta be a middle ground somewhere

Bob Orleck
6 months 13 days ago
“I have yet to hear 1 coherent argument why pot should not be legalized.” Mike Ferzoco, it must be that you are not listening. If you would have attended the press conference of physicians from six different medical organizations you would have heard very coherent arguments regarding the dangers. If you would talk to police chiefs and sheriffs they would give you something to think about. If you would take time and read the 83 page Health Assessment report of the Vermont Department of Health http://healthvermont.gov/pubs/healthassessments/documents/HIA _ marijuana_regulation_in_vermont_201601.pdf and the agreement with it by the Vermont Principal’s Association, you would… Read more »
Mike Ferzoco
6 months 12 days ago

Ah, the reefer madness set. Got it. It’s a “gateway drug,” right? Can I see stats on pot overdose deaths? Oh, and -2 tokes and where’s the heroin? Can we be grown ups for a moment? I think the issue these docs allude to is compulsive behavior, not the substance itself. The “dangers” of pot is being arrested! The issue confronting us is freedom. I’m for it.

Bob Orleck
6 months 12 days ago

Mike you and I know that you did not read the things written or you would try to intelligently discuss them and not just parrot the pot lover’s put down lines. You are so wrong and you don’t get arrested for something that has already been decriminalized. Why is that hard to understand? Marijuana worsens psychotic/schizophrenic behavior, damages brain development in the young and that is proven by science and the death by drugged driving increases in places where pot is legal is documented. Read the facts with an open mind if possible.

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