Alaska plans to tack on a $50 tax to each ounce of marijuana that is sold, thanks to an initiative that was voted into law back in November 2014.
According to recent projections released on January 2, 2015, by the Alaska Department of Revenue, the state stands to gain anywhere from $5.1 million to $19.2 million in tax revenue from the sale of legal marijuana. The state estimates that the amount of marijuana consumption will range from 101,800 ounces to 383,520 ounces each year. Multiply those numbers by the $50 tax rate per ounce and this equals Alaska’s tax revenue projection.
The estimates take into account both the amount of marijuana that is consumed in the state each year and the portion of consumers who will start buying their marijuana from state-sanctioned vendors. But they do not take into account the amount of revenue that will be generated from tourist sales, excise taxes or other fees that may be imposed by local governments. The state expects it will cost between $3.7 million to $7 million to implement the proper regulatory and enforcement protocols.
Reasons the state’s tax revenue projections are not deemed to be reliable include:
• They fail to properly account for the percentage of marijuana users. Due to stigmas and the historical classification of marijuana as an illegal product, many of those polled may not admit that they use cannabis.
• There is no way to know how many consumers are going to switch over from the black market to the legal retail market. As of now, consumers that purchase from the black market do not have to worry about paying tax on marijuana purchases. What incentives other than legalities do consumers have to start purchasing retail marijuana?
• Licensing and zoning requirements. How hard will it be for interested parties to gain the credentials they need to become legal retailers or producers?
• They do not accurately account for the percentage of users that will alter their consumption habits due to price changes. Consumption habits may increase or decrease, and until more statistics are available, estimates are being kept low.
While policymakers are looking at Washington and Colorado’s legal marijuana industries, there are some differences between those and Alaska’s that should be noted. Unlike Washington and Colorado, Alaska does not have a medical marijuana system to fall back on, so it must rely on the commercial industry. Alaska may still come out ahead in tax revenue because a higher amount of marijuana consumers crossing over to the retail market per capita is expected.
Of course, this is all speculation until the facts emerge. Ken Alper, a tax division director for the Department of Revenue, feels that the estimated tax revenue numbers are really just an educated guess. He says,
“To a certain extent you’re shooting in the dark here.”
It will be interesting to see the future impact cannabis economically has in Alaska.