Business & Economy

Key House committee advances marijuana sales bill with 20% tax

Rep. Janet Ancel, D-Calais, chair of the House Ways and Means Committee, discusses a cannabis regulation bill Wednesday. Photo by Glenn Russell/VTDigger

The House Ways and Means Committee advanced legislation Wednesday that would legalize a marketplace for marijuana and set a 20% combined tax rate on sales of the substance.

The action means the bill, S.54, will likely see a full vote on the House floor in the coming weeks, and represents major movement for the legislation, which stalled in the Ways and Means Committee when it arrived there last year. 

Under the House bill, which was reported out of committee on a 7-3 vote, cannabis purchases would face a 14% excise tax and a 6% sales tax. The excise tax would send revenue to the state’s general fund, and the sales tax would feed the education fund.  

According to a mid-range estimate from the Joint Fiscal Office, the state could expect to see about $13 million in tax revenue about four years after dispensaries start selling to consumers in 2022. Of that revenue, $8.9 million would be sent to the state’s general fund, and $3.8 million would go into the education fund. 

In determining how marijuana should be taxed, lawmakers sought to ensure that the rate was high enough to generate substantial revenue for the state.

But they were also cautious about making sure the tax wasn’t so high that users would be discouraged from buying the drug at dispensaries, and continue to heavily use the black market. 

Other states that have recently legalized cannabis have seen thriving black markets, even after dispensaries have opened

“We sort of found that 20%, which is what Massachussetts does, is a good place to land,” committee chair Rep. Janet Ancel, D-Calais, said after the vote. “I think there might be some tolerance for being a little higher than that, but not much.” 

The version of the bill to tax and regulate marijuana that passed the Senate last year had a lower, 16% combined tax rate.   

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The committee also jettisoned a 2% local option tax that would have allowed municipalities to collect revenue from cannabis dispensaries. 

Karen Horn, director of public policy and advocacy at the Vermont League of Cities and Towns. VLCT photo

Karen Horn, a lobbyist for the Vermont League of Cities and Towns, urged lawmakers to keep the local option tax in the bill, and said that towns are going to need additional revenue to cover the costs of managing a new legal cannabis market. 

“Municipalities are going to be responsible for enforcement at the local level so we’re going to need to address zoning issues,” Horn told the committee Wednesday morning. 

“We’re going to need to address complaints about odor about secondhand smoke … security concerns and hours of operations and events,” she said. 

Ancel said she preferred a sales tax that would provide money for the education fund, “which benefits every town in the state, rather than individual towns.”

Sen. Dick Sears, D-Bennington, the chair of the Senate Judiciary Committee and a longtime proponent of marijuana legalization, said he believes that 20% tax rate is a “little too high.” 

The reason: “Because we want to compete with the black market,” he said. 

He added that he supports keeping a local option tax for municipalities, because it gives them an incentive to allow dispensaries and other cannabis facilities to open up. 

After passing the Ways and Means Committee, the cannabis bill now moves to the House Appropriations Committee, and will likely see a vote on the House floor soon. 

Mitzi Johnson
House Speaker Mitzi Johnson. Photo by Mike Dougherty/VTDigger

While there is broad, tripartisan support to legalize marijuana sales in the House, Speaker Mitzi Johnson, D-South Hero, has been reluctant to back the measure and has reservations about expanding legalization. But she has said she won’t stand in the way of the measure if it earns the 76 votes it needs to pass and addresses concerns about roadside safety, youth usage and the impact a marijuana industry could have on the environment. 

Gov. Phil Scott has also said he could support a bill to tax and regulate marijuana if it addresses similar concerns and has even pitched using marijuana revenue to fund his proposal to offer universal after-school programs to children in Vermont

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Xander Landen

About Xander

Xander Landen is VTDigger's political reporter. He previously worked at the Keene Sentinel covering crime, courts and local government. Xander got his start in public radio, writing and producing stories for NPR affiliates including WBUR in Boston and WNYC in New York. While at WNYC, he contributed to an award-winning investigation of how police departments shield misconduct records from the public. He is a graduate of Tufts University and his work has also appeared in PBS NewsHour and The Christian Science Monitor.

Email: [email protected]

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Howie Goldarb

13 million would be about 3.25 million 1/8 bags worth of sales at $20 a bag. That seems very ambitious since prices are going to drop and many in Vermont are just growing their own now.

Bob Stannard

It’s a weed. Let’s not overthink it.

John M Farrell

Complicated issue. I think cannabis should be taxed to gain revenue but most people are smart enough to grow their own to avoid the cost, possible contamination and not deal with “shady” characters selling the product. 20% seems too high

Wayne Curley

The black market will prevail because that pot will be priced lower and no tax. The State will not realize the tax revenue it has assumed and already has planned to spend money it will not have.

Stop automatically feeding the Education Fund without addressing the fact that we already spend too much for results that don’t reflect the money spent.

pat hurley

checkout Washington st. 28% rise in auto accidents, is it worth it I ask. the answer is no

luke lamone

Would not be surprised to learn the MA retail marijuana lobby hires lobbyists to fight this bill. If VT legalizes retail sales it will cost the MA stores thousands of individual retail sales.

Jason Pare

No cannabis smoker is going to purchase from a store that is going to rob them by taxing it at 20%. How can one justify a tax rate different from all other products? Pure greed and hysteria. Only Vermont could screw up such a windfall by going way overboard with their strategy. The black market will prevail and home growers will be laughing all the way.

Mike Eig

The Montpelier clown show never ceases to amaze.

Ed Gullo

Good thing the 2% local tax option was dropped.
Marijuana revenue in California has slumped because of high taxation.. as high as 80% when state and local taxes on growers, retailers and consumers are included.
The gray market is thriving there..and taking money away from the state.

Contrast that with Oregon, where it’s relatively easy to open a pot store and state taxes are 17% with a 3% local option.

Oregon retailing and growing is a vigorous business, so much so that the state is a major exporter of cannabis.
That could be a plus for Vermont which is still an agricultural state.

Tom Koch

Bottom line: The costs associated with this bill will exceed the revenue taken in. It’s a loser, and not just financially.

Don White

How come the tax at the State of VT run alcohol dispensaries is only 10%?

Jamie Carter

Tax and regulate it and use the funds to provide universal after school care. An adult should be able to smoke cannabis in the comfort of their own home if the choose to.

As for the tax… 20% sounds high but realistically people are absolutely going to walk into a store and pay $24 for $20 worth of cannabis. Others will go buy a clone and grow it themselves, and some will buy seeds and do the same. Mass reported $420M in sales so obviously people are willing to pay the tax. In Vermont the tax on Cigarettes is higher and yet people still buy them, Liquor is also up there and people still buy spirits.

Maybe residents of New Hampshire will finally have some incentive to shop in Vermont for a change… .

Kevin C. Whitcavitch

Why would a state legalize the growing and consumption of a federally illegal drug and THEN decide to profit by the same. I think back over 50 years of my life when Vermonters have been growing and consuming pot and they think that NOW there going to tax it. Wake up Montpelier!

Matthew Choate

We should absolutely move this forward but I don’t think we need another dime going to the Education Fund. We have declining enrollment, a demographic shift underway that will continue to result in less children, and an ever increasing spend on schools. Time to reduce that and shift some of the scarcer and scarcer dollars to other priorities – perhaps the Family Leave bill that was just killed as we cannot keep adding more and more tax burden on a shrinking pool of tax payers. Let the revenue from this go to the General Fund – fix some roads, invest in tourism, continue the path to revitalizing downtowns with better housing. There are so many other options.

Karen McIlveen1

What is the proposed tax for legal hallucinogens? The legislators, deputy governor and proponents of higher taxes are salivating at the thought of more disposable revenue to leak away. This is garbage, grow your own and black market products are indistinguishable from taxed marijuana. BTW a cute little tax stamp on the taxed product is a serious joke.

Ed Stokes

A flourishing, unregulated, environment for growing and marketing cannabis already exists in Vermont.

What’s wrong with that?

The state has finally come to grips with the longstanding fact that Vermonters grow and smoke marijuana.

The next logical step would be to stop harassing our fellow citizens who chose to do it. Not to construct a new bureaucracy in a futile effort to compete with a vigorous free market.

 

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