House has to backtrack on pot bill

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.

“There are certain things that we have to clear up and so because of that I think it’s important that with a bill of this magnitude that we try to get it right or as close to right the first time, and so I’d rather do that than rush it or try to rush it through tomorrow,” DeLeo said.

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.

Washington state has the highest tax for legal marijuana at 37 percent. Maine, where voters also approved adult use of pot, plans on a 10 percent tax. The Massachusetts referendum approved by voters would levy a maximum of 12 percent tax at the retail level – 3.75 percent excise and a 2 percent local option on top of the sales tax.

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.”

Meet the Author

Bruce Mohl

Editor, CommonWealth

About Bruce Mohl

Bruce Mohl is the editor of CommonWealth magazine. Bruce came to CommonWealth from the Boston Globe, where he spent nearly 30 years in a wide variety of positions covering business and politics. He covered the Massachusetts State House and served as the Globe’s State House bureau chief in the late 1980s. He also reported for the Globe’s Spotlight Team, winning a Loeb award in 1992 for coverage of conflicts of interest in the state’s pension system. He served as the Globe’s political editor in 1994 and went on to cover consumer issues for the newspaper. At CommonWealth, Bruce helped launch the magazine’s website and has written about a wide range of issues with a special focus on politics, tax policy, energy, and gambling. Bruce is a graduate of Ohio Wesleyan University and the Fletcher School of Law and Diplomacy at Tufts University. He lives in Dorchester.

About Bruce Mohl

Bruce Mohl is the editor of CommonWealth magazine. Bruce came to CommonWealth from the Boston Globe, where he spent nearly 30 years in a wide variety of positions covering business and politics. He covered the Massachusetts State House and served as the Globe’s State House bureau chief in the late 1980s. He also reported for the Globe’s Spotlight Team, winning a Loeb award in 1992 for coverage of conflicts of interest in the state’s pension system. He served as the Globe’s political editor in 1994 and went on to cover consumer issues for the newspaper. At CommonWealth, Bruce helped launch the magazine’s website and has written about a wide range of issues with a special focus on politics, tax policy, energy, and gambling. Bruce is a graduate of Ohio Wesleyan University and the Fletcher School of Law and Diplomacy at Tufts University. He lives in Dorchester.

Meet the Author

Jack Sullivan

Senior Investigative Reporter, CommonWealth

About Jack Sullivan

Jack Sullivan is a veteran of the Boston newspaper scene for nearly three decades. Prior to joining CommonWealth, he was editorial page editor of The Patriot Ledger in Quincy, a part of the GateHouse Media chain. Prior to that he was news editor at another GateHouse paper, The Enterprise of Brockton, and also was city edition editor at the Ledger. Jack was an investigative and enterprise reporter and executive city editor at the Boston Herald and a reporter at The Boston Globe.

He has reported stories such as the federal investigation into the Teamsters, the workings of the Yawkey Trust and sale of the Red Sox, organized crime, the church sex abuse scandal and the September 11 terrorist attacks. He has covered the State House, state and local politics, K-16 education, courts, crime, and general assignment.

Jack received the New England Press Association award for investigative reporting for a series on unused properties owned by the Catholic Archdiocese of Boston, and shared the association's award for business for his reporting on the sale of the Boston Red Sox. As the Ledger editorial page editor, he won second place in 2007 for editorial writing from the Inland Press Association, the nation's oldest national journalism association of nearly 900 newspapers as members.

At CommonWealth, Jack and editor Bruce Mohl won first place for In-Depth Reporting from the Association of Capitol Reporters and Editors for a look at special education funding in Massachusetts. The same organization also awarded first place to a unique collaboration between WFXT-TV (FOX25) and CommonWealth for a series of stories on the Boston Redevelopment Authority and city employees getting affordable housing units, written by Jack and Bruce.

A Boston native, Jack has lived in Massachusetts all his life. He was a major in English and history with a minor in political science at the University of Massachusetts, Boston. A father and grandfather, he lives in Plymouth with his wife, Susan.

About Jack Sullivan

Jack Sullivan is a veteran of the Boston newspaper scene for nearly three decades. Prior to joining CommonWealth, he was editorial page editor of The Patriot Ledger in Quincy, a part of the GateHouse Media chain. Prior to that he was news editor at another GateHouse paper, The Enterprise of Brockton, and also was city edition editor at the Ledger. Jack was an investigative and enterprise reporter and executive city editor at the Boston Herald and a reporter at The Boston Globe.

He has reported stories such as the federal investigation into the Teamsters, the workings of the Yawkey Trust and sale of the Red Sox, organized crime, the church sex abuse scandal and the September 11 terrorist attacks. He has covered the State House, state and local politics, K-16 education, courts, crime, and general assignment.

Jack received the New England Press Association award for investigative reporting for a series on unused properties owned by the Catholic Archdiocese of Boston, and shared the association's award for business for his reporting on the sale of the Boston Red Sox. As the Ledger editorial page editor, he won second place in 2007 for editorial writing from the Inland Press Association, the nation's oldest national journalism association of nearly 900 newspapers as members.

At CommonWealth, Jack and editor Bruce Mohl won first place for In-Depth Reporting from the Association of Capitol Reporters and Editors for a look at special education funding in Massachusetts. The same organization also awarded first place to a unique collaboration between WFXT-TV (FOX25) and CommonWealth for a series of stories on the Boston Redevelopment Authority and city employees getting affordable housing units, written by Jack and Bruce.

A Boston native, Jack has lived in Massachusetts all his life. He was a major in English and history with a minor in political science at the University of Massachusetts, Boston. A father and grandfather, he lives in Plymouth with his wife, Susan.

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.”