Extras on Excise: Recreational Marijuana—Which State Is Next to Reap Tax Benefits?

There are two states in the United States that have legalized marijuana for recreational purposes, Colorado and Washington. The road to approval was a highly debated one but one thing is certain—the legalization of recreational marijuana will lead to an increase in tax revenue for these states.

The debate over the legalization of recreational marijuana hasn't been confined within Colorado and Washington's borders. It has been reported that there are more than 20 states considering legalizing some form of recreational marijuana.

The Marijuana Policy Project expects to see the legalization of recreational marijuana in Alaska this year. Local activists for the project are wrapping up a petition drive to place an initiative on the ballot this August. The project also expects Oregon to be voting on a similar measure this November.

In 2016 alone the Marijuana Policy Project plans to support initiatives in Arizona, California, Maine, Massachusetts, Montana, and Nevada.

The Marijuana Policy Project has also been lobbying to pass a recreational marijuana measures in six state legislatures over the next few years—Delaware, Hawaii, Maryland, New Hampshire, Rhode Island, and Vermont.

Rhode Island may be the first to pass the measure via state legislature, possibly through the reintroduction of a recreational marijuana bill. Though Gov. Lincoln Chafee has reportedly expressed doubts about the passage of a recreational marijuana bill, activists are confident.

Last year, a bill proposing legalized recreational marijuana was held for further study. The bill provided for an excise tax of $50 dollars per ounce and would subject a licensee to various application and registration fees.

The revenue collected from the legalization of recreational marijuana would first defray all the administrative costs associated with legalization. Additional proceeds would then be turned over to the state’s general fund where 40 percent would go to the department of health for substance abuse treatment programs, and then 10 percent would be used to fund the study of medical efficacy of marijuana.

The legalization of recreational marijuana in Rhode Island and other states will likely be subject to robust debate, and it is just as likely tax revenue will play a significant role in the legalization debate.

Continue the discussion on Bloomberg BNA’s State Tax group: How big of a role do you think tax considerations will have the legalization of recreational marijuana?

By Renee Bartoli

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