“We all are in survival mode and are coming together to share with you our pain.”
By James Brooks, Alaska Beacon
A committee of the Alaska Legislature held an off-season hearing on Friday to consider a proposal that could reduce the state tax on marijuana in the state.
House Bill 119 was considered by the House Labor and Commerce Committee on Friday. It would change the state’s system of marijuana taxation from a tax based on the weight to a tax based on the sale.
According to the marijuana industry in the state, the change is urgently needed to help marijuana business compete with the black market of the state.
Lacy Wilcox is the legislative liaison of the Alaska Marijuana Industry Association.
Alaska has taxed marijuana at $50 an ounce since it legalized recreational marijuana sales in 2014. This figure was established by the ballot initiative that made Alaska third state to legalize recreational marijuana use.
Since then, other states have legalized recreational sales at lower tax rates. Alaska has the highest marijuana tax when local taxes are included, according to a 2022 report by the Tax Policy Center of the Brookings Institution.
This has created a windfall of revenue for the state. In fiscal year 2020, the state collected over $30 million in marijuana taxes.
Experts in the marijuana industry say that not everything is green. Tax revenue in fiscal year 2022 fell to less that $29 million. This was the first year since legalization when marijuana tax revenue decreased on an annual basis.
Cody Rice, a legislative aide, told the committee that preliminary figures indicate that tax revenues have rebounded in the recently completed fiscal year 2023. However, projections show that they will fall sharply in the fiscal period that began on July 1.
Alaska Marijuana Industry Association says that dozens of marijuana businesses will close this year. Many are also delinquent in their taxes.
Wilcox said to the committee, “We’re all in survival mode and we want to share our pain together.”
Last year, Gov. Mike Dunleavy , a Republican , convened an industry task force for recreational marijuana in order to assess the progress of this new industry. This group produced a report early this year with a number of recommendations. One of the recommendations was to create a new taxation system.
Brandon Emmett was a member of marijuana industry.
“I am confident that [marijuana] remains cheaper on the black-market.” Alaska’s tax burden and Marijuana Control Board are causing businesses to become uncompetitive and prices to remain high.
Emmett stated that, based on anecdotal information, he believes that “40 to 50%” of marijuana sold in Alaska are sold on the blackmarket because the unregulated marketplace offers better prices.
HB 119 was drafted to address concerns of the industry. In its original draft, the bill would have changed a $50 per ounce tax that cultivators collect to a 3 percent tax collected by retailers.
The bill was amended into a 10 percent tax. Industry officials stated on Friday that this change is a sidestep, and would not address their concerns.
Rice, who analyzed the effects of tax changes for the Labor and Commerce Committee said that as the legal market grows, lower taxes may eventually lead to greater state tax revenues.
State officials warned that this would come with a downside: Short-term, revenue would drop and programs to combat drug abuse that depend on the marijuana tax would be forced to cut back or stop their operations.
This suspension may be temporary if tax revenues rebound.
The Committee did not take any immediate action on Friday. However, the chair of the committee, Rep. Jesse Sumner, (R-Wasilla), stated that members could consider amending the bill during a committee meeting in November or October.
This article was originally published by Alaska Beacon.
New federal data shows record number of banks working with marijuana businesses as Senate schedules vote on reform bill
Photo by Chris Wallis // Side Pocket Images.
The article Alaska Marijuana Businesses “In Survival Mode,” Operators Tell lawmakers at hearing on tax reduction bill first appeared on Marijuana Moment.
