Vermont Looks Toward The Money In Legalized Marijuana

VERMONT: The debate over marijuana in Vermont has until now focused largely on issues of public health and safety, and on the effects of statutory reform on usage rates among teenagers and young adults. 

But the seemingly inevitable march toward legalization will soon turn lawmakers’ focus toward money — and the birth of the revenue stream that would accompany the taxing and regulation of a crop that yields among the highest profit margins in Vermont agriculture.

The release of a U.S. Department of Justice memorandum late last month has re-ignited long-simmering debates over legalization across the country, including in Vermont, where Gov. Peter Shumlin announced his support recently for the eventual adoption of a tax-and-regulate model here.

The DOJ’s directive — that it won’t interfere with producers or sellers of cannabis in states with their own regulatory system — has emboldened state-level politicians for whom federal prohibition had formerly been the chief obstacle to a functioning marijuana market.

Vermont is very unlikely to see a vote on legalization next year; a national marijuana advocacy group announced a lobbying effort earlier this week aimed at legalizing the drug here by 2017.

But Sen. Jeannette White, a Windham County Democrat, says she plans to bring up for a vote a bill introduced last year that would create a panel to study the risks and benefits of legalization.

“And I think that’s one of the questions that’s on people’s minds … what is the revenue potential? And how do you tax it?” White says.

Shumlin says he’ll be looking for answers to those questions in Colorado and Washington state, which adopted tax-and-regulate models in public referenda last year.

A study by the Office of Financial Management in Washington, D.C., which provides analysis and research to the governor and Legislature, projected marijuana-related revenues of as high as $1.9 billion over the first five fiscal years of the legalization law.

That analysis included some questionable methodologies, including annual consumption rates that assumed a person would use two grams each time — an enormous amount of marijuana for one person to consume in a single sitting. The estimate also relied on the imposition of a 25 percent excise tax at three separate points along the production chain.

Revenue estimates in Colorado, based on a one-time, 10 percent excise tax assessed on wholesale transactions, are more modest. Betty Aldworth, deputy director of the National Cannabis Industry Association, aided in the legalization campaign in Colorado. She says estimates for combined tax revenue and law-enforcement savings in that state top out at $60 million annually.

In fact, Aldworth says, no one will know how much revenue legalization will generate until months after the new laws begin taking effect in early 2014.

“And Vermont’s population is tiny, and the revenue numbers are definitely going to be based in significant part on consumption levels of the population, so your numbers are obviously going to be a lot smaller than in Colorado or Washington,” Aldworth says.

Mason Tvert, communications director for the Marijuana Policy Project, the Washington, D.C.-based advocacy group that led the years-long push for decriminalization in Vermont, and will now lobby for legalization, says revenue potential in the Green Mountain State is significant, its small population notwithstanding.

In national drug-use surveys, Vermonters are routinely found to smoke more marijuana per capita than residents of almost any other state. Based on usage rates gleaned from federal data, and assuming a state excise tax of $50 per ounce — premium-grade marijuana sells for about $350 an ounce — Tvert says his organization projects revenues of between $7 million and $11 million annually for Vermont.

He says that doesn’t include the $2.2 million to $3.3 million that would derive from the state’s 6 percent sales tax.

“It’s obviously hard to project,” Tvert says. “But it is going to be significant.”

Allen St. Pierre, executive director of the National Organization for the Reform of Marijuana Laws, or NORML, says revenue totals will benefit from elected officials’ willingness to subject the product to outsized rates.

“It’s going to be taxed, frankly speaking, at vice levels,” St. Pierre says. “Not many things are taxed in America higher than 10 percent, except vice, like gambling winnings or tobacco or booze.”

St. Pierre says revenue from the taxation of the product itself, however, captures only a fraction of the economic-development benefits that would derive from bringing into the white market the cultivation, processing and sale of the drug.

Pinning down the cash value of the state’s marijuana crop is an inexact science, and estimates vary wildly. According to an analysis by NORML, Vermont growers produce more than 14,000 pounds of processed marijuana annually, with a retail value on the low end of $73 million, which would rank it as the number-two cash crop behind hay, and well ahead of maple syrup.

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