Washington and Colorado are the first states to legalize the sale and use of marijuana. With the Seahawks and the Broncos in the Super Bowl, all the media chatter around the game has been featuring bad puns about “packing a super ‘bowl’ of marijuana,” or “‘scoring’ before the big game.” But a lot of outlets have missed that the legalization movement is taking shape outside Colorado and Washington as well. The New Hampshire House is likely to pass HB 495, sponsored by Rep. Steve Vaillancourt (R), whereafter the bill will have to pass the Senate and the governor’s desk.
The governor, Maggie Hassan (D) has expressed that she will veto the legalization measure, a peculiarity which prompted noted 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. expert David Brunori to quip in Forbes, “Hassan is obviously not as open-minded as the lefty Republicans pushing the legislation.”
But apparently the parties are entirely bucking stereotypes in New Hampshire, because the Republican-backed HB 495 comes with a hefty tax component too: a 15 percent 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. at the retail level and a $30-per-ounce tax at the wholesale level.
Assuming a retail price of $30 and a wholesale price of $15, the tax on New Hampshire marijuana would be $8.25, or 27.5 percent. Using those same assumptions, a Colorado reporter found that the state and local taxes on marijuana in Denver would be just slightly higher, at $8.59.
In his piece in Forbes, David Brunori makes the case that we shouldn’t subject marijuana to excise taxes at all, because the product doesn’t present a clear negative externality. I’m inclined to agree with that line of thinking, but I think an even more prescient argument to make is that states should be mindful of the blowback from taxing marijuana at such high rates. If operating a business within the parameters of the law is too costly for tax reasons, marijuana will remain an underground industry, which seems to me to entirely defeat the purpose of legalization in the first place.
We already have at least some troubling evidence from Colorado that the rates are too high; this Slate article concludes that it is still more lucrative to be an illegal marijuana dealer.
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