House has to backtrack on pot bill
Legislation raising marijuana tax to astronomical levels raises concerns
HOUSE LEADERS DECIDED to pull back and revamp their rewrite of a voter-approved ballot question legalizing marijuana after concerns were raised that their bill would give Massachusetts the highest tax rate on recreational pot in the country – as much as 55 percent or more by some calculations.
The bill approved on Wednesday by the Joint Committee on Marijuana Policy is very different from what voters approved last year. In addition to the dramatic increases in pot taxes, the bill restructures the Cannabis Control Commission by adding two members and letting the governor and attorney general be part of the member selection along with the state treasurer. The measure also makes it easier for cities and towns to bar retail pot establishments within their borders.
The House and Senate members of the committee held joint hearings on pot this year, but when it came time to actually write the bill all collaboration appears to have ended. Sen. Patricia Jehlen of Somerville, the Senate chair of the committee, said she received a copy of what her House counterpart, Rep. Mark Cusack of Braintree, was proposing on Tuesday night. The vote on the bill went along chamber lines, with all 10 House members in attendance voting yes and all six senators abstaining. Even some of the House members expressed reservations about some of the provisions in the bill.
The full House was expected to take up the bill Thursday, but after a late-afternoon caucus House Speaker Robert DeLeo announced that he was pulling the measure back for some tweaking and polishing, although several sources characterized some of the changes likely to be made as major revisions. One source familiar with the House’s deliberations called the pullback of the bill as a major embarrassment.
House members on Tuesday said the bill would set a tax rate of 28 percent on retail pot sales, but at Wednesday’s hearing many members of the committee said the language of the legislation would allow an overall tax rate of 55 percent, and possibly higher on some products.
The House bill says “a cannabis licensee shall pay a daily tax of 16.75 percent on gross cannabis revenues.” In addition, the licensee is required to pay 5 percent to the community in which it is located as well as a state sales tax of 6.25 percent for a total of 28 percent.
However, a licensee is defined in the measure as a person or business “who holds an adult use cannabis license, a medical use cannabis license, a marijuana retailer license, a marijuana product manufacturer license, or a marijuana cultivator license.”
What that means is at every step along the way from seed to sale – growing, making, or selling wholesale – the 16.75 percent excise tax and the 5 percent local tax is added on, presumably to be passed onto the customer. So a retailer would pay a 21.75 percent tax on the wholesale product and then add another 28 percent at the point of sale, for a total tax of 49.75 percent. If the state sales tax is added at the wholesale level, the total would come close to 55 percent. State House News reported that the tax on some edible products would approach 80 percent.
Jehlen said the combination of wholesale and retail taxes on pot would be a mistake. “It may be a drafting error [on the tax language], we don’t know,” said Jehlen. “But it’s not as described.”
Cusack, who did not address the tax rate issue during the committee’s executive session, said after the House caucus that it was not his intent to raises taxes so high. He said the intent of the House was to have an all-in 28 percent tax rate on pot.
Nearly all of the 10 committee members who spoke prior to voting – Democrat and Republican, House and Senate members – expressed concern about the elevated tax rate and the impact of the wording.
Advocates of last November’s ballot question said the bill is an insult to voters, gutting many of the key provisions that voters supported by a 54-46 margin. Will Luzier, who was the campaign manager for the referendum, said if the House tax language was a mistake, it shows the authors didn’t think it through.
“If that’s not the intent of the drafters, you should go back to the drawing table,” he said.
Jehlen said she’d prefer no changes to the voter-approved law rather than the massive changes proposed in the House bill.
Senate President Stanley Rosenberg also said lawmakers should hew more closely to what the voters approved. “We don’t need a major rewrite,” he said. “We chose to let the public do it. We should not be dramatically rewriting it.”
Gov. Charlie Baker had said he wants a bill on his desk by the end of the month. Jehlen said the Senate plan to vote on its own version of the legislation next week, and then the two branches will have to resolve their differences through a conference committee. It’s unclear whether the House’s delay in taking up the bill will scuttle that plan.
Rosenberg said he would like to deliver a completed bill to the governor’s desk by the end of the month, but he indicated the measure might have to move forward incrementally. He said the only thing that would need to be determined at this point is the structure of the control commission in order to get the permitting process underway in time for the target date of July 1 next year to sell retail marijuana. Most everything else, including taxes and opt-out clauses, could be handled piecemeal, he said.
”It would be better to meet a deadline and a promise we made, but remember, we’re going to do a series of bills over time, so we don’t have to address everything that the committee has worked on already,” he said. “The main thing we have to do is get the governance thing right, so the agency can be pulled together and get working on the regulations.”
The governance issue won’t be easy to resolve. Sources say House and Senate officials were generally in agreement on the governance issue until roughly two weeks ago, when the House said it wanted to move in a different direction. It appears the House wanted to give less control of the Cannabis Commission to Treasurer Deborah Goldberg. The House bill gives the governor, the attorney general, and the treasurer the power to appoint one commissioner, and those three appointees would name the other two. Previous discussions had focused on giving Goldberg three appointees to the commission.
In addition to raising the tax rate, the House bill reshuffles oversight of medical marijuana by pulling it in under the same regulatory umbrella as recreational pot. The measure also allows governing bodies of cities and towns such as city councils and boards of selectmen to vote on a retail sales ban; the law passed by referendum requires community-wide votes. The House bill also creates two new investigative and prosecutorial agencies under the cannabis commission as well as in the attorney general’s office.
While the House bill, like the state Gaming Commission, prohibits felons from working in the industry, it does allow those convicted of marijuana-only crimes to be employed if they have no other flags on their records.
Sen. Linda Dorcena Forry of Dorchester, who was part of a legislative fact-finding trip to Colorado last year to see how the first-in-the-nation law was working, said she’s comfortable with some of the House bill’s components and said changes will come in the Senate. She said the tax rate needs to be higher than the referendum to fund treatment and education programs, although “50 percent is too high.”She also said neither the ballot question nor the House bill sufficiently address the need for communities of color to become part of the pot industry, especially given the fact many were arrested for use of pot before it was decriminalized.
“Voters voted but now it comes to the Legislature,” she said. “Not everything the voters vote on is 100 percent correct 100 percent of the time. We have to go down into the weeds to make sure it’s about public safety, it’s about health, it’s about [regulating] marketing. It is our role of as legislators to make sure there’s a safety component.”