Center for New Revenue opposes repeal of per-ounce marijuana tax in Alaska

Email to Erika McConnell, Director of the Alaska Alcohol and Marijuana Control Office

Dear Ms. McConnell:

The cannabis industry naturally wants to repeal the weight-based, per-pound tax you have in Alaska. http://komonews.com/news/local/alaskas-legal-pot-industry-decries-taxes-seeks-changes

The state and the people have interests that conflict with those of the industry.

By way of introduction, I am the director of a North Carolina non-profit, the Center for New Revenue, that focuses on marijuana tax policy. At conferences and talks, I have met several Alaskans, including my friend with a North Carolina connection Jay Butler, and Cynthia Franklin when she was involved in cannabis for the state. I served as co-chair of the Regulatory and Tax Structure Working Group of the California Blue Ribbon Commission on marijuana legalization – a project of the Lieutenant Governor and the ACLU of Northern California. https://www.safeandsmartpolicy.org. Also, I was a co-author of the RAND Report, Considering Marijuana Legalization: Insights for Vermont and Other Jurisdictions,http://www.rand.org/pubs/research_reports/RR864.html (attached).

To be sure, early after-tax cannabis prices tend to be high. But as supply comes on line, pre-tax prices drop.

Taxing by price, should you abandon your $50 per ounce tax ($1.76 per gram), will turn into a huge giveaway to the industry. Prices will decline over time, and taxes per unit will, too – cutting revenue, and working against public health concerns.

The notion of switching to a potency, or THC-based tax, has a lot to recommend it. The difficulty is measuring THC, especially for raw plant matter. In that RAND report, we look at potency taxation starting on page 80. We suggest a bifurcated approach: Measure the THC in concentrates, and take the word of the seller (whose customers tend to seek high THC levels) for raw plant matter.

Several other jurisdictions found their way into panic mode and considered tax cuts in the light of early market instability – and high prices. The Colorado Legislature actually cut taxes, but reversed course and raised taxes instead, before the legislated cut ever took effect. https://newrevenue.org/2017/01/21/5094/

California recently rejected an industry plan to repeal its weight-based tax and cut its complementary price-based tax. http://sacramento.cbslocal.com/2018/05/25/california-marijuana-tax-cut-fail/

If some tax relief for the cannabis industry is warranted, the most prudent course would be to cut the per-ounce rate temporarily, via a sunsetted reduction. Eliminating the weight-based tax would be short-sighted.

Thank you for reading this. If there is anything I can do for you, please let me know.

At your service,

Pat Oglesby

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