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NEW JERSEY FINALLY ON TRACK TO LEGALIZE POT

November 25, 2019

 

"Yes, Virginia, there is a Santa Claus." 1/

 

A marijuana-legalizing ballot measure expected to go before voters next year states that legal weed sales in New Jersey would only be subject to the state sales tax.

 

Municipalities allowing legal weed dispensaries would also be able to levy their own "transfer tax" up to 2%. Yet the combined total possible tax of 8.625% would easily be the lowest in the United States.

 

Applying our propriety SP+GTM algorithm, a 92+ factor signals that the key element is lower tax rates to making government-sanctioned weed competitive with black-market weed. Originally, the legislators planned to place a $42-an-ounce tax on the stuff and make it a recreational use. commodity. It’ll be just like booze, which anyone over 21 in the state can purchase. The only difference is that New Jersey doesn’t tax liquor as onerously as it will pot. There’s a 12-cents-a-gallon tax on beer in Jersey and 85.7 cents a gallon on wine. Hard liquor is taxed at $5.50 a gallon. Meanwhile, Trenton wants pot smokers to pay an extra $42 an ounce for the privilege of buying legal marijuana. For the Jersey to effective tax marijuana, it must consider who best means to market it within a competitive landscape.  

 

Keep in mind, people who don’t want to pay the liquor tax can’t find someone with a moonshine still in a backyard and buy booze illegally. At least, they can’t find a still operator very easily — even in rural Jersey. Sure, grandpa may be making some wine in his cellar. And crazy Uncle Lou might have received a beer-making kit for Christmas. But, by and large, there isn’t much of an underground business in spirits.

 

Marijuana sellers are all over the place. Apply the statistical base of the SP+GTM algorithm, the estimated profits of illegal pot in New Jersey for the calendar year 2018 was a whopping $250 million and this year it is running 19% hotter.  

 

REVIEW OF THE $42 TAX

 

The state was insisting (March 2019) on its $42-an-ounce cut of the action — are the cops going to haul anyone into court for having a few marijuana plants among the cucumbers and squash in a home garden? We don’t think so. We think Jersey is going to get some reefer madness once its marijuana tax scheme doesn’t work out quite as planned. If the voters back recreational weed for adults in a likely November 2020 vote, future legislation would iron out additional details — and that could include additional excise taxes, would be the logical conclusion. Indeed, the ballot questions can and should be broadly written because it's important to be flexible. The ability to make corrective changes are essential.

 

 

Remember: the pot black-market is Jersey's only competitor with a zero tax base and operating profits above 90%.

 

A new tax won't be solidified until and after the ballot measure passes. The legal weed landscape will likely have changed by then. Other states will legalize marijuana by then, and there's a desire in the Northeast to have a common tax rate (among states that have legalized weed. If New Jersey declined to levy an additional tax on marijuana, it would be the only state to do so. All 11 of the states with legal weed institute some kind of excise tax on marijuana, about 26 percent on average when including both excise and sales taxes. Of the nine states with percentage-based legal weed taxes on the books, the average rate is 26 percent, including taxes specifically placed on marijuana and general sales taxes.

 

Washington marijuana customers pay 43% in state taxes, the highest in the United States. Michigan customers pay 16%, the lowest of the states where weed is legal. In Alaska and Maine, sales tax is levied at a flat rate per ounce. Colorado and California levy additional wholesale, flat-rate taxes when marijuana is grown and sold. Those taxes are also passed onto consumers.

 

Most states also allow towns to pass their own marijuana taxes, in addition to any general sales taxes they already levy. By the time the first ounce of New Jersey legal weed is sold, the state will likely have levied some kind of excise tax. What we see now is going to continue to evolve after it's approved. 

 

During the two years legal weed has been debated in the Legislature, proposed marijuana taxes have gone through many forms. A bill first introduced by state Sen. Nicholas Scutari, D-Union, called for an escalating marijuana tax that would start at 7% and rise to 25% over a few years. Gov. Phil Murphy's administration planned for a 25% tax in previous budgets. The final version of a proposed marijuana legalization bill — which came a few votes short of passage in March — called for a flat tax rate of $42 per ounce, which would allow the state to count on a steady revenue stream even if the price of cannabis fell.

 

At current estimated value, $42 per ounce equates to a 12% tax rate. 

 

In an interview, Scutari said removing any additional New Jersey legal weed taxes from the ballot question is a way to combat the black market. The cheaper the weed, the more likely people are to buy it from a licensed marijuana dispensary than an illegal pot dealer. "One of the things we can try to do to combat and eviscerate the black market is to have the lowest possible tax rate," Scutari said in an interview. "It'll take a long time to get rid of the black market, but this will help get it done."

 

 

note: As for report FJCDR 127 - The relationship between legal weed and the black market isn't black and white. 

 

The survival or decimation erosion of the black market is a common calling card of both marijuana legalization advocates and opponents. Legal weed activists claim that legalizing marijuana would send customers away from illegal pot dealers and into dispensaries.

Opponents cite arrest statistics in existing legal weed states, where many are still arrested for selling weed without a license or having more than the legal limit in their possession. But a number of illegal pot dealers estimated data suggests that they wouldn't close up shop due to legal weed. Instead, they expected their business to grow as new customers, dissatisfied by the price and options at dispensaries, turned to them. 

 

According to a analysis provided by our SP+GTM forward algorithm, nationwide legal sales nationwide are expected to top over $3 billion in 2019. But during the same year, nearly $9 billion in illegal weed sales are expected on the black market. 

 

Scutari and state Senate President Stephen Sweeney, D-Gloucester, on Monday announced that they were officially ending any attempt to legalize weed in New Jersey through the legislative process. Instead, they introduced a ballot resolution that's expected to go to New Jersey voters on Election Day 2020. In order for the measure to appear on the ballot, it must first be approved by the Senate and Assembly, which the senators said they expect to occur this year. 

If 60% of both houses approve the measure, it will go on the ballot automatically. If it's approved by a lesser margin this year, they'll have to vote on it again before August in order for it to appear on the ballot. 

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1/ "Yes, Virginia, there is a Santa Claus" is a phrase from an editorial called "Is There a Santa Claus?". The editorial appeared in the September 21, 1897, edition of The (New York) Sun and has since become part of popular Christmas folklore in ... It is the most reprinted newspaper editorial in the English language.

 

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