If Michigan voters elect to legalize marijuana in November, the state can expect to collect hundreds of millions of dollars in tax revenue over the next five years, according to a new report from the non-partisan Michigan Senate Fiscal Agency.
In fact, the new estimates are even higher than those projected by the group sponsoring the legalization ballot measure.
While that group, Regulate Marijuana Like Alcohol In Michigan, predicted that the state would collect about $520 million in cannabis sales and excise tax revenue in the five years after implementation, the government estimate is closer to $730 million over the same time span.
Via Michigan Senate Fiscal Agency.
The initiative, Proposition 1, would impose a 10 percent excise tax on non-medical cannabis sales in addition to the state’s six percent sales tax. It would also eliminate a three percent tax on medical cannabis “provisioning centers,” which was accounted for in the fiscal report.
Where would all that money go?
The 10 percent excise tax revenue would be distributed for transportation infrastructure (35 percent), schools (35 percent) and local jurisdictions that permit adult-use marijuana businesses to operate in their municipalities and counties (15 percent each).
Based on the government report, that means that by the 2022-23 fiscal year, out of of $252 million in total marijuana tax revenue, about $126 million will go toward road construction and K-12 education funds on an annual basis from the excise tax alone. On top of that, schools would receive an additional $77 million a year due to marijuana commerce, allocated from the state’s six percent sales tax.
Then, of course, there’s the cost savings of simply ending marijuana arrests and related prosecutions and incarcerations, as the Michigan Senate Fiscal Agency noted. The proposition “could have a positive fiscal impact on State and local government,” according to the report.
“Fewer felony arrests and convictions could decrease resource demands on court systems, community supervision, jails, and correctional facilities. In 2016, 199 people were sentenced to prison for a marijuana-related felony conviction, and 3,620 were sentenced to jail, probation, or a combination of both.”
The chances that Michigan ends up legalizing marijuana for adult-use seem fairly strong. A September 2018 poll from The Detroit News and WDIV-TV found that 56 percent of likely Michigan voters favor fully legalizing cannabis, compared to just 38 percent who said the opposed ending prohibition.
See the original article published on Marijuana Moment below:
Michigan Officials: Legal Marijuana Will Create Even More Revenue Than Activists Predicted
The 25 percent sales-tax break enjoyed by Oregon’s recreational cannabis consumers effectively ends Monday January 4, marking a new era in the state’s approach to marijuana.
The temporary, tax-free sale of recreational marijuana began in the Beaver State on Oct. 1 at the state’s medical marijuana dispensaries, which number over 250.
The tax is tied to preparations by the Oregon Liquor Control Commission — the state agency tasked with recreational marijuana regulations — to open stores throughout the state. Upon the opening of the recreational retail outlets licensed by the commission in late 2016, a permanent 17 percent sales tax will be imposed in the place of the 25 percent.
There are plans to make the year’s extra funds count. According to the Oregon Department of Revenue, the funds are to be allocated towards such initiatives as employee security training, increased use of security cameras, and new ventures dubbed “cash handling locations,” that would be prepared to accept large cash payments to the state. Most of the state’s transactions involving medical marijuana take place in cash, since the federal ban on recreational pot has led to many traditional banks steering clear of the state’s sanctioned retailers and growers.
According to Don Morse, owner of the Human Collective in Southwest Portland, the tax hike is unlikely to seriously affect most recreational consumers, or to have led to consumers stocking up on cheaper products ahead of the tax’s institution. This is because, unlike medical marijuana consumers, those purchasing recreational cannabis rarely buy it in large quantities.
“Every time you go to a liquor store, you don’t buy a whole case of something,”
Said Morse. “You buy a bottle.”
Morse does not believe consumers will be discouraged. In fact, he may run into a different problem, as the change will force him to keep large amounts of money on hand. “That is a lot of extra month to keep on hand,” he said.
In Denver, with the recent legalization of marijuana, it seems as if dispensary owners would be rejoicing. Instead, many of them are complaining and throwing up their hands in frustration because of outdated tax laws that eat deeply into their profits.
Many marijuana businesses are paying up to 70 percent of their profits to the Internal Revenue Service (IRS). Because of an old law that was put in place to keep criminal drug dealers from reducing their tax liability to profit off the government, many pot shop owners are unable to deduct regular business expenses. Normal business expenses like rent, utilities, payroll salaries and business supplies are among the deductions that cannabis business owners are unable to take advantage of because of the convoluted and somewhat discriminatory laws and stereotypes about marijuana.
Part of the problem lies in a law that was passed in 1982 by Congress. This law was created after a convicted drug dealer filed a claim in tax court that he should be able to write off many of his operational expenses, such as his phone, travel, and packaging. The IRS, still to this day, prohibits credits and deductions to businesses that illegally traffic in drugs. Unfortunately, this includes legal marijuana businesses.
Rachel Gillette, executive director of the Colorado chapter of the National Organization for the Reform of Marijuana Laws (NORML) said,
“There’s no reason that they should be taxed out of existence by the federal government.”
Gillette recently represented a business owner who was levied an $866,000 tax bill, which was more than half of the business owner’s profits for the prior year. She and the business owner are still in negotiations with tax officials.
In the 23 states that allow the sale and use of medical and recreational marijuana, there are some laws where possession is still considered a federal crime. As a result, many dispensary owners cannot even open bank accounts with any funds that come from their businesses. When it is time to file taxes, owners can either pay what the IRS says they owe or try to get around the laws and risk getting audited. Of course, marijuana shop owners can take their chances and attempt to fight the IRS in court, however, very few have been successful.
Colorado and several other states have made recent changes at the state level to allow marijuana business owners to deduct their expenses on their state tax returns. However, there is still a lot of work that needs to be done to create federal legislation to rectify the discrepancies in federal tax law that pertain to marijuana dispensaries.
There is still a lot of criticism and opposition to the legalization and sale of marijuana. That opposition is delaying crucial progress that would keep hard working business owners operational. In the meantime, some dispensary shop owners are being taxed out of business.