Last year Ohio voters turned down an attempt to legalize marijuana. The rejection of the amendment to the Ohio constitution had more to do with the creation of a monopoly supply deal than actual opposition to medical or recreational marijuana. The LA Times published an article by Davan Maharaj, editor-in-chief of the LA Times, on March 25, 2016 titled “The Evergreen State Invites Financiers to Invest in Pot”. This article and other data sources suggests that Ohio cannot afford to continue to pay for law enforcement and incarceration costs related to marijuana law enforcement while not collecting the huge tax revenues of states like Colorado and Washington on marijuana sales.
Colorado, Washington and Oregon have legalized marijuana for medical and recreational use. Each of these states had a residency requirement for investors in their respective marijuana businesses. Washington has eliminated its six month residency requirement for marijuana investors, and Oregon has now followed suit. Colorado is now considering the elimination of its residency restriction for investors.
It is easy to understand why these states have become active supporters of investment in the marijuana business, with each state receiving substantial tax revenue on marijuana sales. Washington had $65 million in tax revenue two years ago and $119 million in their last fiscal year.
Oregon had its first legal marijuana sales on Oct. 1, 2015. Its tax revenues are only beginning, but the tax structure provides significant revenue opportunity. The tax on retail marijuana sales provides 17% sales tax to the state, and up to an additional 3% sales tax for counties. Oregon residents over the age of 21 can possess up to eight ounces of dried marijuana and four plants. The distribution of revenue from commercial marijuana sales are:
Oregon Marijuana Account distributed: 40% to Common School Fund; 20% for mental health/alcohol/drug services; 15% for state police; 20% for local law enforcement; 5% to Oregon Health Authority.
Revenue from commercial marijuana sales in Colorado is significant.
Total marijuana tax revenue includes the 2.9% retail and medical marijuana sales tax, 10% retail marijuana special sales tax, 15% marijuana excise tax, and retail/medical marijuana application and license fees.
The tax revenues received by the state of Colorado for marijuana sales during the month of January 2016 should be carefully considered by Ohio’s legislature.
2.9% state sales tax – January 2016
Medical marijuana $ 897,973
Retail* marijuana $1,584,113
Total state sales tax revenue $2,484,086
10% marijuana special retail sales tax – January 2016
Distributed to local jurisdictions $ 778,816
Retained by state of Colorado $4,413,310
Unallocated $ 21,237
Total retail sales tax collections $5,213,363
The 15% excise tax collected by cultivators on wholesale sales to first-level retailers for payment to the state of Colorado was not published. The 15% excise tax is applied to three classifications of marijuana products, i.e. flower, trim and immature plants. Total tax revenues on marijuana sales, excluding 15% cultivator excise tax on wholesale sales, was $7,697,449 in January 2016. Annualized projection of marijuana tax revenue for 2016 is approximately $92,369,388 plus the excise tax. The excise tax proceeds are earmarked for new school construction.
It is obvious that the tax revenues from marijuana sales in Colorado, Oregon and Washington are substantial. In each state, sales are restricted to those over 21, with strict monitoring of people purchasing marijuana under a medically certified need. The pressure for Ohio and all other states to legalize medical and recreational marijuana is increasing. Laws modeled after Colorado and Washington will be passed in Ohio if objections by Gov. John Kasich and Attorney General Mike DeWine are overcome by monetary concerns in the legislature and local governments, and the will of the people putting marijuana legislation on the ballot. While Kasich and DeWine can delay passage of marijuana legalization, the trend is to legalize marijuana across the US. Federal legislation to remove marijuana from the FDA’s schedule I classification is in progress, although passage before the November 2016 presidential election is unlikely.
It is time for the state of Ohio to stop spending money to put people in jail and paying for their incarceration for using marijuana. It is time to change the laws so that Ohio can start collecting taxes on marijuana sales for purposes of drug education, school funding, and general revenues. Adults should be able to use marijuana for pain management, mental health and recreational uses.