OLYMPIA — In the state’s battle to eliminate illegal marijuana sales, a lawmaker’s proposal to reduce the tax on legal recreational marijuana might have to wait.
House Bill 2347 would reduce the excise tax on marijuana sales from 37 percent to 25 percent to help make prices more competitive with their black market counterparts, said the bill’s primary sponsor, Rep. Christopher Hurst, D-Enumclaw.
Hurst and proponents of the bill say a reduced tax would be one of the most important ways of eliminating the black market sales of marijuana, which Hurst said still make up 65 percent to 75 percent of sales in the state.
“We can’t get there if we price ourselves so much higher than the illicit market,” he said.
“The criminals love the tax rate being high because they don’t pay it, and it makes it so the legal people can’t compete with them.”
Didn’t pass committee
His proposal failed to pass the House Finance Committee by the Legislature’s cutoff point Tuesday.
However, Hurst said it still could be worked in as an amendment to the budget, though he hasn’t decided whether to pursue that course.
Hurst said the current tax on pot is too high and punishes licensed retailers who are playing by the rules of Initiative 502, which voters approved in 2012 to allow the production, sale and recreational use of marijuana by adults in Washington state.
“The voters, when they passed 502, didn’t say that they wanted more people smoking marijuana or people to smoke more marijuana,” Hurst said.
“What they said was they wanted a stabilized, well-regulated market, and fundamentally, you don’t get there if the price is so high that you’re keeping organized crime in business.”
The proposal came a year after the Legislature eliminated individual taxes between the chains of producers, processors and retailers, and implemented a one-time tax on the final product at retail.
K.C. Franks, owner of Stash, a pot shop in Seattle, said he supports reducing the taxes on marijuana sold in his store.
Franks has owned Stash for six months and said the taxes marijuana retailers have to pay provide unique challenges to them that other businesses in other industries don’t face.
“Marijuana businesses need to sell $200,000 or more a month to break even,” Franks said.
Franks said cheaper prices could help retailers compete with the illegal industry, which he said has advantages such as having a delivery system for products.
Some critics worried that reducing the tax would’ve done more harm for the industry and state than good by leading to a decrease in revenue.
The fiscal impact estimate for the bill was a projected loss of $87 million in the upcoming fiscal year, with about $268 million in revenue expected with a 37 percent tax, as opposed to $181 million with a 25 percent tax.
“It’s a pretty major hit as the state is trying to figure out how to fully fund education, mental health and other important public services,” said Nick Federici of the Revenue Coalition in a hearing on the bill Feb. 5 in the House Finance Committee.
Fiscal impact
Hurst and proponents of the bill say the fiscal impact was overblown and didn’t account for the people who would choose to buy legal marijuana because of the cheaper prices.
Proponents say customers would rather purchase from stores with competitive prices, where they can feel safer than on the streets, and purchase products of higher quality.
“The people who’ve been purchasing illegally and not paying any tax are now going to come to a proper place that’s licensed,” Franks said.
“What [the state] may lose in the percentage per sale, they’re going to increase revenue by having more people from the black market come into the fair market.”
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This story is part of a series of news reports from the Washington State Legislature provided through a reporting internship sponsored by the Washington Newspaper Publishers Association Foundation. Reach Reporter LaVendrick Smith at lavendricksmith@gmail.com.
