Gov. Phil Murphy and state legislative leaders have reached a deal in principle on how to tax and regulate marijuana in New Jersey following months of negotiations, paving the way to bringing legal marijuana into the Garden State.
Multiple legislative and industry sources confirmed an arrangement was set up on a bill which would tax bud by the ounce, in place of the controversial sales tax which had split Murphy and state Senate President Stephen Sweeney. Those resources requested anonymity because they weren’t authorized to speak publicly on the offer.
State Sen. Nicholas Scutari, D-Union, the prime sponsor of the legalization bill, refused to disclose any of the details of the negotiation. But he said they had been as close as they had been at reaching a deal.
“We don’t have a final deal,” Scutari advised NJ Advance Media on Friday night. “There still are additional details to be worked out, however, the two sticking points (taxes and a commission regulating the business ), we are there. But we are not finalized.”
Sweeney, D-Gloucester, and a spokesman for Murphy declined comment. State Assembly Speaker Craig Coughlin, D-Middlesex, couldn’t be reached for comment.
Another major sticking point was how the state’s new cannabis sector would be controlled. The tentative deal would put an independent commission in charge of most aspects. Recently, Sweeney has publicly said Murphy, a fellow Democrat, was unwilling to support this notion, so lawmakers agreed the governor could appoint three of the five members of their projected Cannabis Regulatory Commission.
The last bill would also address clearing marijuana convictions from criminal documents — expungements. That is a key factor of the attempt to legalize marijuana. Legislators have been crafting a new expungement bill that may be introduced as early as next week.
Once those agreements are in place, Murphy, Sweeney and Coughlin might have to begin wrangling votes. Sweeney said in November that he would not place a legalization bill he did not think could find the votes to pass.
Will weed be legalized soon in N.J.?”We’re relying upon the governor to help us in the legislative process because we need help obtaining the votes,” Scutari added.
Both houses of the Democrat-controlled country Legislature — both the Senate and Assembly — have to pass on the bill before Murphy could sign it into lawenforcement.
The Tax Debate
Only a couple of weeks ago, the legal bud debate had appeared to be locked in stalemate, partially because of taxes. Sweeney had stated he would not believe anything above a 12 percent earnings tax, but Murphy was searching for a bigger amount.
This tax agreement helps on two fronts. First, as it’s a tax on burden, neither the governor nor the senate president needed to cave on the earnings tax rate. Second, the tax on burden hedges against drops in marijuana costs, which has occurred in other states that have legalized.
NJ Advance Media reported last month that Murphy and legislative leaders were considering a tax on weight, and that it might reignite marijuana talks in Trenton. Now it appears that making a bargain on taxes was a priority for state leaders.
Here is how it would work: A tax on weight protects against falling costs by maintaining the tax the exact same regardless of price. If the tax is $42 per ounce — that is reportedly the tax rate that is on the table — it would remain the same whether the oz price $300 or $150 or even $50.
Under the excise tax that was previously being discussed, consumers would pay a percentage of the sale in tax. In Sweeney’s projected 12 percent, customers will pay $36 in earnings on a $300 oz of cannabis.
Having a sales tax, a drop in cost, very similar to what’s been seen in countries including Colorado and Oregon, would substantially hurt the state’s tax revenue. The Colorado Department of Revenue reported a year ago that bud prices had fallen by roughly 70 percent since recreational sales began in 2014. That price fall hasn’t yet been reflected in the state’s earnings, but experts expect Colorado to start feeling the squeeze shortly. Ounces of marijuana in Oregon are now selling for $50, way down from once the market became lawful.
Stanford University professor Keith Humphreys composed at The Washington Post recently that dropping cannabis prices probably will put some entrepreneurs from business, but added”the bigger financial hit will be felt by countries which tax marijuana based on its price.”