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Missouri Voters Face Complicated Choices on Medical Marijuana Taxes

4 min readBy: Jared Walczak

Medical marijuana is currently legal in 31 states. By next year, their ranks are expected to grow—and Missouri is likely to be counted among them. Prior polling shows that a solid majority of Missourians support legalizing marijuana for medical use, making the question less one of whether the voters will authorize medical marijuana this year than how they will choose to taxA tax is a mandatory payment or charge collected by local, state, and national governments from individuals or businesses to cover the costs of general government services, goods, and activities. it.

Because, confusingly, voters have three options, and they’re not all mutually exclusive. The first two are constitutional amendments, though you wouldn’t know it to read them. The latter is an initiated statute. The first of the two amendments runs 12 pages, and spells out everything from requirements for mandatory reporters to wrongful termination claims to font sizes on product warnings to the fee imposed for patient identification cards—and the second amendment puts it to shame at 19 pages. By way of comparison, no amendment to the U.S. Constitution would run a full page.

Although they differ in a variety of particulars, the key distinctions between the three ballot questions are (1) their constitutional status, (2) the rate of taxation they impose, and (3) the dedication of new revenues.

Amendment 2, titled the Medical Marijuana and Veteran Healthcare Services Initiative, imposes a 4 percent ad valorem tax on sales of medical marijuana, with revenues dedicated to a newly created Missouri Veterans’ Health and Care Fund. Moneys from this fund could be spent on veterans’ homes, the state’s service officer’s program, and a range of veterans’ services, including health care, mental health, housing assistance, drug rehabilitation, job training, and tuition assistance. This approach would raise an estimated $24 million a year.

Amendment 3, the Medical Marijuana and Biomedical Research and Drug Development Institute Initiative, imposes a higher 15 percent excise taxAn excise tax is a tax imposed on a specific good or activity. Excise taxes are commonly levied on cigarettes, alcoholic beverages, soda, gasoline, insurance premiums, amusement activities, and betting, and typically make up a relatively small and volatile portion of state and local and, to a lesser extent, federal tax collections. on medical marijuana, using the estimated $66 million in annual revenue to fund the establishment of a Biomedical Research and Drug Development Institute to develop cures for cancer and currently incurable diseases. That would represent less than one-one hundredth of a percent of the amount that the U.S. pharmaceutical industry spends on research and development each year, and a tiny fraction of the average cost of developing a new drug, which one frequently-cited study pegs at $2.6 billion, including $1.4 billion in direct expenditures.

Proposition C, the Medical Marijuana and Veterans Healthcare Services, Education, Drug Treatment, and Public Safety Initiative, is an initiated statute, not a constitutional amendment. It would enact a 2 percent excise tax on marijuana with an estimated $10 million in annual revenue dedicated to veterans’ services, drug treatment, education, and public safety. The revenue is to be split equally among the Missouri Veterans’ Health and Care Fund, the Missouri Public Safety Fund, the Missouri Drug Treatment Fund, and the Early Child Development, Education and Care Fund, the first three of which are newly created by the ballot measure.

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The traditional legislative process involves an amendments stage in which drafting errors are resolved and other concerns addressed. This process is not, of course, available with ballot questions, which is one reason why they tend to be short and leave details of implementation up to the legislature—yet these run 12, 19, and 49 pages, respectively.

Thus, one of the constitutional amendments separately lists “housing assistance” and “housing assistance for homeless prevention” as valid expenditures from one of the new funds, even though it is not clear that there is any reason to designate a subset of housing assistance after authorizing the broader purpose. And then there’s the allocation of revenues under Proposition C, the 2 percent tax, where the language stipulates that “one-half percent of the amount generated by the tax” is to be designated to each of the four funds, even though the intent is clearly to earmark one-half percentage point of the tax for each.

Yet even that wouldn’t be quite right, since up to five percent can be siphoned off to cover actual collection costs. A formalistic reading suggests that only seven percent of the revenue (about $700,000 a year) is allocated, and most of it to cover the cost of collections. A looser interpretation has 105 percent of revenue allocated—which has its own problems.

At present, only about a third of the medical marijuana states impose an excise tax on its sale, above and beyond any possible application of the general sales taxA sales tax is levied on retail sales of goods and services and, ideally, should apply to all final consumption with few exemptions. Many governments exempt goods like groceries; base broadening, such as including groceries, could keep rates lower. A sales tax should exempt business-to-business transactions which, when taxed, cause tax pyramiding. . Of those, the highest rates are found in Illinois and New York, at 7 percent—less than half the rate contemplated by Amendment 3. The rates proposed under Amendment 2 and Proposition C are more in line with those in other states.

Should both amendments be approved by the voters, the one with the highest vote total would be ratified. Should voters approve one or both amendments and the initiated statute, the outcome is less certain, though the most straightforward interpretation would require the imposition of two separate medical marijuana excise taxes, one constitutional and one statutory, with different revenue dedications.

Because legislators have frequently left marijuana questions up to voters, the constitutional amendment approach—though not otherwise necessary—is fairly common. Rarely, however, have voters been presented with such a convoluted list of options as Missouri voters will face on November 6th.