State lawmakers float one proposal to fill COVID-19 budget gaps: marijuana sales

Monitor staff
Published: 9/15/2020 4:36:04 PM

Precisely how much New Hampshire stands to lose in business and meals and room tax revenue as a result of the coronavirus remains unknown. Gov. Chris Sununu has thrown out varying figures in the hundreds of millions of dollars, warning of the potential for cuts in coming years.

But some state lawmakers are already looking to a new approach to make up the difference: marijuana.

At a House committee session Tuesday, some Democrats expressed support for legalizing cannabis, creating a retail framework to sell it to consumers, and taxing the profits.

And the expected coming economic difficulties only bolster the urgency for marijuana legalization, the lawmakers say.

“Going forward next year it looks like we’re going to have a huge hole in the state budget,” said Rep. David Meuse, a Portsmouth Democrat. “We’re going to need to get creative when it comes to filling that hole. So far it doesn’t look like we’re going to be able to fill it with any money coming from the federal government. And some of the projections that I’ve seen are pretty terrifying.”

With tourism dollars plummeting and winter threatening outdoor restaurant operations, leaders in both parties are warning of diminished state coffers ahead of the two-year budget process next year.

“This is an area that I think we need to seriously look at,” Meuse said of cannabis taxation.

Meuse was speaking in support of an approach laid out in House Bill 1663, a marijuana legalization proposal that was held back by the House last year for further study.

Under the 26-page bill, New Hampshire would set up an ambitious scheme to not only allow the consumption and cultivation of marijuana for those over 21 but to also create licensing and regulatory scheme for retail operations.

Crucial to the budget arguments, the bill would set up a tax system, too. For growers selling cannabis to retailers, sales would be taxed at 5%. For retailers passing it on to consumers, there would be an additional 8% tax.

In total, the state could raise $36.4 million the first year of the combined tax, according to an analysis of the legislation by the state’s Department of Revenue Administration, which assumed around 130,000 users of legal cannabis in the first year.

Meuse said the move could provide a new revenue source for the state that involves taxing a new business activity, rather than taxing an existing one. He compared it to the legalization of sports betting, which was touted as a way to bring in over $10 million in its first year.

On Tuesday, the House Criminal Justice and Public Safety Committee voted to recommend the Legislature consider the cannabis legalization bill in the next session.

But not all members of the committee were on board with the idea as a revenue driver.

“When you start collecting revenue from a source like marijuana, which is going to affect all our youth and many of our other citizens one way or another, I just don’t think its a good thing to do,” said Rep. David Welch, a Kingston Republican. “I have supported the marijuana laws that we have. I don’t support making an industry out of it.”

Franklin Republican Rep. Dave Testerman rejected the argument that new revenue sources are needed to weather the budget difficulties, pointing to the state’s response to the recession in 2010.

“Back in 2010 we were facing an $800 million higher budget than we had money for,” Testerman said, referring to the years under the speakership of Republican Bill O’Brien and Democratic Gov. John Lynch. “And the Legislature found a way to get around that.”

But Meuse pushed back at that example.

“And we cut mental health, we cut education, we basically almost totally indiscriminately,” he countered in response. “I recognize the fact that we are going to have to make some cuts, and think those are going to be hard on everybody. Whatever we can do to bring new revenue into the state in a way that as much as we possibly can protects kids and protects minors and protects people who shouldn’t have access to this stuff, I think we need to be doing it.”

The right to get marijuana legalized in New Hampshire, a goal of some Republican and Democrats in recent years, has been no easy road. Republican Gov. Chris Sununu adamantly opposes it, and the latest effort to pass it in 2019 died in the Senate after passing the House.

Meanwhile, the strategy of aiming for a full retail, regulation and taxation scheme – rather than just legalizing the use of cannabis without permitting retail sales, as Vermont does – has backfired for advocates in the past. In 2019, Rep. Renny Cushing, a Hampton Democrat at the forefront for the legalization drive, said that moving forward, the legalization movement would likely pare back their ambitions and back a bill that simply legalized the substance, to start.

But some Democrats are certain it’s just a matter of waiting for the inevitable.

“Marijuana’s here to stay,” said Rep. Beth Rodd, a Bradford Democrat. “It’s legal in most of New England.”

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